U.S. dollar advances before Fed decision; Swedish hike fails to boost crown



* Sweden's central bank hikes rates by 100 bps

* U.S. rate hike in focus as Fed starts meeting on Tuesday

* BOE, BOJ to make rate policy decisions on Thursday

By Gertrude Chavez-Dreyfuss

NEW YORK, Sept 20 (Reuters) - The dollar ascended close to a two-decade high on Tuesday, as investors geared up for another aggressive interest rate hike from the Federal Reserve, the main focus in a week packed with central bank meetings.

The Fed started a two-day meeting on Tuesday, with rate futures traders pricing in an 83% chance of a 75 basis-point hike and a 17% probability of a 100 bps of tightening. FEDWATCH

The dollar index was on track for its fifth weekly gain in six and was last up 0.5% at 110.10 =USD , just below a more than 20-year high of 110.79 touched earlier this month.

So far this year, the dollar has soared roughly 15%, on pace for its largest yearly percentage gain in 41 years.

"It's difficult to see the top for the dollar at the moment. Short-term forces are driving demand for the dollar: the combination of weak risk sentiment, fears of global recession, a hawkish Fed, and the war in Ukraine," said Vassili Serebriakov, FX strategist, at UBS in New York.

"The dollar will turn lower once U.S. inflation peaks and global economy bottoms, but we're not there yet," he added.

Also on Tuesday, Sweden's central bank raised rates by a full percentage point. The rate hike by the Riksbank was larger than analysts had expected, causing the Swedish crown to briefly spike against the euro and dollar.

But it failed to retain that strength. The euro extended recent gains, climbing to a fresh six-month top of 10.8808 crowns. The euro was last up 0.6% at 10.8630 EURSEK=D3 . The dollar also climbed 0.6% to 10.8994 crowns. SEK=D3

"In a way, this was an attempt by the Riksbank to lift the krona, but it failed, and it's not surprising," said Francesco Pesole, currency strategist at ING.

He said the relationship between European currencies and central bank policies had been breaking down as markets increasingly traded on Europe's energy and growth outlook instead.

Providing additional support to the dollar, the U.S. two-year Treasury yield US2YT=RR , which is sensitive to rate policy expectations, rose as high as 3.992%, its highest since November 2007.

The euro EUR=EBS slid 0.6% to $0.9966, after dropping as low as $0.9864 on Sept. 6 for the first time in two decades.

Europe's single currency failed to get a boost even after European Central Bank President Christine Lagarde said the bank may need to raise rates to a level that restricts economic growth to cool demand and combat unacceptably high inflation.

The beaten-down sterling GBP=D3 fell 0.5% to $1.1385.

The Bank of England will decide on rate policy on Thursday, and investors are split over whether a 50 or 75 bps hike is on the way.

The Bank of Japan also meets this week but is widely expected to keep its ultra-easy stimulus settings unchanged - including pinning the 10-year yield near zero - to support a fragile economic recovery.

The yen has slumped this year due to this policy and the dollar was last up 0.4% on the Japanese currency at 143.78, continuing a week-long consolidation after climbing as high as 144.99 on Sept. 7 for the first time in 24 years.

The Japanese currency has plunged nearly 20% against the dollar so far in 2022.

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

Currency bid prices at 3:58PM (1958 GMT) Description

RIC

Last

U.S. Close Pct Change

YTD Pct

High Bid

Low Bid

Previous

Change

Session

Dollar index

=USD

110.1300

109.5400

+0.54%

15.123%

+110.2900 +109.3500 Euro/Dollar

EUR=EBS

$0.9976

$1.0025

-0.49%

-12.25%

+$1.0051

+$0.9956 Dollar/Yen

JPY=EBS

143.6750

143.2000

+0.34%

+24.81%

+143.9150 +142.9350 Euro/Yen

EURJPY=

143.32

143.52

-0.14%

+9.98%

+144.0300 +143.0300 Dollar/Swiss

CHF=EBS

0.9641

0.9647

-0.06%

+5.70%

+0.9682

+0.9624 Sterling/Dollar GBP=D3

$1.1383

$1.1434

-0.45%

-15.84%

+$1.1460

+$1.1358 Dollar/Canadian CAD=D3

1.3360

1.3251

+0.83%

+5.67%

+1.3375

+1.3228 Aussie/Dollar

AUD=D3

$0.6692

$0.6727

-0.50%

-7.92%

+$0.6747

+$0.6677 Euro/Swiss

EURCHF=

0.9615

0.9667

-0.54%

-7.27%

+0.9682

+0.9604 Euro/Sterling

EURGBP=

0.8763

0.8765

-0.02%

+4.32%

+0.8784

+0.8725 NZ

NZD=D3

$0.5899

$0.5957

-0.96%

-13.80%

+$0.5975

+$0.5887 Dollar/Dollar

Dollar/Norway

NOK=D3

10.3210

10.2285

+1.17%

+17.46%

+10.3570

+10.2035 Euro/Norway

EURNOK=

10.3001

10.2043

+0.94%

+2.87%

+10.3215

+10.2296 Dollar/Sweden

SEK=

10.8799

10.7623

+0.55%

+20.65%

+10.9189

+10.6828 Euro/Sweden

EURSEK=

10.8552

10.7955

+0.55%

+6.03%

+10.8808

+10.7572



GRAPHIC-World FX rates Link
GRAPHIC-Central banks ramp up fight against inflation Link



Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Alun John in London and Kevin Buckland in
Tokyo; Editing by Chizu Nomiyama, Lisa Shumaker and Richard Chang

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