Dollar firms, yen wobbles near 7-month high ahead of Fed, BOJ decisions

Key Points:

• The U.S. dollar strengthened on Monday as investors anticipated possible interest rate hikes from the Federal Reserve and the Bank of Japan, while rising oil prices above $100 per barrel dampened risk sentiment amid Middle East tensions.
• The European Central Bank recently raised rates and signaled further hikes, with the Fed expected to announce a rate increase on Wednesday and the BOJ likely to follow suit on Friday, while the Bank of England is expected to hold rates steady.
• Market expectations for a Fed rate hike have increased significantly after U.S. inflation data showed accelerated consumer prices in August, with traders pricing in an 86% chance of a hike this week and further increases later in the year.
• The Japanese yen remained near a seven-month high but weakened slightly against the dollar, as the BOJ is expected to signal a faster pace of rate hikes to sustain yen strength; failure to do so could trigger a dollar/yen rally.
• Brent crude prices rose 2% following attacks on Saudi Arabia and Gulf shipping, intensifying supply concerns and adding complexity to global rate decisions amid volatile bond markets.