U.S. dollar advances as markets brace for hefty Fed rate hike



* Markets in consolidation mode ahead of Fed policy decision

* Fed funds futures price in 21% chance of 100-basis-point hike

* China's yuan hits new 26-month low against dollar

* New Zealand dollar falls to lowest level since May 2020

By Dhara Ranasinghe and Gertrude Chavez-Dreyfuss

LONDON/NEW YORK, Sept 19 (Reuters) - The dollar gained against major currencies on Monday, trading within narrow ranges ahead of a slew of central bank meetings this week led by the Federal Reserve, which is likely to deliver another hefty interest rate hike.

Trade was generally subdued, with markets in London and Tokyo closed for public holidays.

World stock markets remained on edge and the dollar maintained its firm tone, given expectations that the Fed would maintain its aggressive tightening path to contain uncomfortably high inflation.

"On a high level, the greenback is benefiting from a continued sell-off in global equities," said John Doyle, vice president of trading and dealing at Monex USA in Washington.

"With the Fed's decision pending, I think the dollar will continue to take its cues from overall risk sentiment. We do not think the Fed will hike 100 basis points this week, but the potential is still real," he added.

Fed funds futures have priced in a 79% chance of a 75-basis-point rate hike this week and a 21% probability of a 100-basis-point increase at the conclusion of the U.S. central bank's two-day policy meeting, according to Refinitiv data. FEDWATCH

The dollar index =USD , which measures the currency against six counterparts, was up 0.4% at 109.98, not far from 20-year high of 110.79 hit on Sept. 7.

This week is also smattered with holidays that could thin liquidity and result in sharper price moves, with Japan and Britain off on Monday, Australia on Thursday, and Japan again on Friday, among others.

In other currencies, the euro was 0.3% lower against the dollar at $0.9984 EUR=EBS , sterling was 0.4% weaker at $1.1386 GBP=D3 and within sight of Friday's 37-year lows, while the New Zealand and Australian dollars fell 0.8% and 0.5%, respectively.

The New Zealand dollar fell to its lowest level since May 2020 of US$0.5933, and was last at US$0.5937 NZD=D3 .

The Canadian dollar fell to its lowest level in almost two years at C$1.3324 per U.S. dollar CAD=D3 .

"The drop in oil has allowed a modest rally against commodity-based currencies such as the Canadian dollar," said Monex's Doyle.

The dollar was around 0.4% firmer at 143.50 yen JPY=EBS , hovering beneath a strong resistance level at 145 that has been reinforced by Japanese policymakers' toughened talk of currency intervention.

The Bank of Japan is widely expected to stick with massive stimulus at its meeting on Wednesday and Thursday, keeping its ultra-loose policy in place. But a turning point in Japanese monetary policy may come sooner than has been thought, with the central bank recently dropping the word "temporary" for its description of elevated inflation.

China's yuan ended at a fresh 26-month low on Monday and traded below the psychologically critical 7-per-dollar level CNY=CFXS . In offshore trade, the yuan was 0.35 weaker CNH=D3 .

Bitcoin BTC=BTSP , the biggest cryptocurrency by market value, fell to a three-month low below $19,000, as unease over rising interest rates globally knocked risk assets. It was last down 0.9% at $19,241.

Ether, the cryptocurrency used in the Ethereum blockchain, rallied from a two-month low against the dollar and was last up 1.8% on the day at $1,358 ETH=BTSP .

Ethereum went through a major software upgrade last week that alters the way ether tokens are created, drastically reducing its energy usage.

========================================================

Currency bid prices at 10:34AM (1434 GMT) Description

RIC

Last

U.S. Close Pct Change

YTD Pct

High Bid

Low Bid

Previous

Change

Session

Dollar index

=USD

109.8700

109.5500

+0.31%

14.851%

+110.1800 +109.4800 Euro/Dollar

EUR=EBS

$0.9995

$1.0015

-0.20%

-12.08%

+$1.0029

+$0.9966 Dollar/Yen

JPY=EBS

143.4100

142.9400

+0.33%

+24.57%

+143.6400 +142.6500 Euro/Yen

EURJPY=

143.35

143.13

+0.15%

+10.00%

+143.5400 +142.8100 Dollar/Swiss

CHF=EBS

0.9666

0.9644

+0.26%

+6.01%

+0.9695

+0.9630 Sterling/Dollar GBP=D3

$1.1398

$1.1422

-0.21%

-15.72%

+$1.1441

+$1.1356 Dollar/Canadian CAD=D3

1.3289

1.3262

+0.23%

+5.13%

+1.3344

+1.3252 Aussie/Dollar

AUD=D3

$0.6693

$0.6722

-0.43%

-7.92%

+$0.6734

+$0.6673 Euro/Swiss

EURCHF=

0.9660

0.9660

+0.00%

-6.84%

+0.9671

+0.9634 Euro/Sterling

EURGBP=

0.8767

0.8768

-0.01%

+4.38%

+0.8787

+0.8748 NZ

NZD=D3

$0.5934

$0.5989

-0.90%

-13.29%

+$0.6002

+$0.5929 Dollar/Dollar

Dollar/Norway

NOK=D3

10.2695

10.2040

+0.79%

+16.74%

+10.3320

+10.1900 Euro/Norway

EURNOK=

10.2695

10.2059

+0.62%

+2.55%

+10.3125

+10.2062 Dollar/Sweden

SEK=

10.8106

10.7337

+0.47%

+19.88%

+10.8348

+10.7251 Euro/Sweden

EURSEK=

10.8069

10.7560

+0.47%

+5.60%

+10.8187

+10.7571



World FX rates Link
Dollar holding strong as markets brace for another aggressive Fed rate hike Link



Reporting by Dhara Ranasinghe in London and Gertrude Chavez-Dreyfuss in New York; Additional reporting by
Kevin Buckland in Tokyo; Editing by Bradley Perrett, Frank Jack Daniel and Paul Simao

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