Global Currencies Navigate Interest Rate Maze

International currency markets reacted to an impending U.S. interest rate decision with the dollar maintaining strength, while the euro neared its yearly low. The yen faces added pressure over speculation of delayed interest rate hikes in Japan. Meanwhile, varying central bank policies globally led to further fiscal uncertainties.

The dollar remained firm near recent peaks on Tuesday, anticipating a potential U.S. interest rate cut, as traders adjusted long-term rate assumptions. In contrast, the euro struggled, heading for a nearly 5% decrease against the dollar, close to the year's low at $1.0518.

U.S. and German ten-year yields widened by nearly 70 basis points over three months, standing at a 216 basis point difference. The yen weakened for the seventh consecutive session, trading at 154.17 per dollar, amid expectations that a Japanese interest rate hike will likely occur in January instead of this week.

The Federal Reserve's decision on interest rates is awaited as a 94% chance of a hike dominates market predictions, despite a surge in services-sector activity. In contrast, the Canadian dollar sank in light of U.S. tariffs and domestic political pressures. Similarly, the Australian and New Zealand dollars are pinned near yearly lows.

(With inputs from agencies.)