Ahead of the Fed Meeting, the US Dollar Strengthens

The US dollar demonstrated its strength ahead of the Federal Reserve Board of Governors' meeting. On March 14, 2016 (until 3 PM WIB), the US dollar index (DXY) was traded at 101.53, up 0.27 percent from the previous day's close. Since February 1, the US dollar index has shown an upward trend.

Analysts predict that the US central bank will raise its benchmark interest rate by 25 basis points (bps) to 1 percent. According to Bloomberg data, the probability of a Fed rate hike reaches 100 percent. This indicates that the market predicts an interest rate increase. The Fed Governors are scheduled to hold their meeting on March 14-15, 2017, local time. A rate hike would indicate that the Fed acknowledges the improvement of the US economy. No increase would indicate that the economic recovery is not as expected.

Regional currencies, including the Indonesian Rupiah, were affected by the US dollar's appreciation. The Rupiah weakened by 0.16 percent to Rp 13,377.5 per US dollar. Similarly, the Thai Baht weakened by 0.05 percent to 35.326 per US dollar, the Chinese Yuan depreciated by 0.08 percent to 6.9196 per US dollar, the Malaysian Ringgit weakened by 0.07 percent to 4.4495 per US dollar, and the Singapore dollar fell by 0.12 percent to 1.4151 per US dollar.