By Yasin Ebrahim
Investing.com – The dollar inched higher against its rivals led by a rise in bond yields on positive economic data as the Federal Reserve's two-day meeting got underway Tuesday.
The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.11% to 90.88.
U.S. bond yields awoke from their recent slumber following data showing U.S. consumer confidence jumped to pre-pandemic highs as the reopening continues to gather pace.
The consumer confidence index rose to 121.7 in April from 109.0 in March, well above economists consensus of 113.0.
The U.S. 10-year yields were at 1.62% on the day.
Against the backdrop of positive economic data, however, the Fed is widely expected to keep its monetary policy decision unchanged.
"No change in policy is expected with policy makers likely to hold rates steady at 0.00%-0.25% and asset purchases at $120 billion per month," Stifel Economics said.
With little change expected on monetary policy, Fed Chairman Jerome Powell's press conference will likely garner added attention.
But the Fed chief, while acknowledging the step up in the recovery, will likely continue to suggest the economy is still a ways off from achieving its employment and inflation targets.
"We also expect the usual script from Fed Chair Jerome Powell speaking of his cautious optimism on the recovery in the press conference while downplaying any talk of meaningful medium-term inflation pressures," ING said in a note.
"Assuming the Fed makes few, if any, substantive changes to its statement, we would expect the dollar to stay on a softening path," ING added.
Others agree, and suggest that dollar will likely struggle to make gains amid the ongoing global reflation trade.
The combination of Powell sticking with his previous remarks and an unchanged monetary policy decision should "be moderately USD negative with the global reflation trade allowing other currencies to rise gradually," National Bank Australia said in a note.