Forex

Dollar Climbs to Two-Week High Before Fed Decision as Euro Heads for Worst Month Among Major Currencies

The dollar index rose to about 102.2 Tuesday as traders positioned for the Fed, ECB and BOJ, while the euro slipped to about $1.114 and Japan's finance minister warned on the yen.

Oct 27, 2026 - 12:19

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The U.S. dollar strengthened against the euro, the yen and sterling on Tuesday, October 27, 2026, as currency traders positioned for a run of central bank decisions this week, beginning with the Federal Reserve on Wednesday. The European Central Bank announces its decision on Thursday and the Bank of Japan on Friday, and all three are expected to leave rates on hold, Reuters reported, leaving the focus on what policymakers signal about the outlook.

Where the major pairs stood

In its New York and London report, Reuters said the euro was down 0.25% at $1.1144, the dollar was up 0.15% at 157.73 yen, and sterling was 0.16% weaker at $1.3317. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.2% to 102.22. FXStreet reported that the index reached a two-week high above 102.00 after touching 101.45 last week, its lowest level since October 1.

In Tokyo, the Bank of Japan's daily foreign exchange report showed the dollar at 157.52-54 yen at 9:00 a.m. Japan time and 157.86-87 yen at 5:00 p.m. Japan time, with a central rate of 157.65. The euro traded at $1.1173-75 and $1.1160-61 at the same two fixing times.

Other currencies were mixed ahead of their own central bank decisions. The New Zealand dollar strengthened 0.33% to $0.5699, while the Canadian dollar weakened 0.14% to C$1.404 per U.S. dollar, Reuters said. The Reserve Bank of New Zealand and the Bank of Canada both announce decisions on Wednesday and are both expected to raise rates, according to Reuters.

Why the dollar firmed

The dollar has steadied after coming under pressure during last week's selloff in high-flying AI stocks, Reuters said. "The dollar has found good support early this week, as stabilising AI-related sentiment has allowed markets to reconnect with the broader supportive backdrop of a hawkish Federal Reserve and high energy prices," Francesco Pesole, currency analyst at ING, said in an earlier version of the Reuters report published by CNBC. Pesole said markets appeared to be positioning for Fed Chair Kevin Warsh to reiterate his commitment to fighting inflation.

"The dollar has rebounded ahead of the Fed meeting and AI sentiment has stabilized a little bit after last week," said Kevin Ford, FX and macro strategist at Convera. "The dollar was caught in the crossfire last week as an extension of the equity distress, high oil prices and what's happening with European fiscal stress coming from France."

The Fed raised its target range by 25 basis points in September to 3.75%-4.00%, its first increase since 2023, and is expected to hold it there on Wednesday, FXStreet reported, adding that traders price in about an 80% probability of another increase in December, according to the CME FedWatch tool.

Euro on track for its worst month among major currencies

Reuters said the euro was on track to be the worst-performing developed-market currency in October, down 1.65% against the dollar, weighed down by high energy costs, volatility in French government bonds and concerns about France's fiscal position. The currency extended its decline after the ECB's quarterly Bank Lending Survey showed the impact of its rate increases becoming visible, which Reuters said could, if the trend continues, reduce pressure at the margin on the ECB to keep raising rates deep into next year.

An FXStreet week-ahead analysis said the ECB is expected to hold its deposit rate at 2.50% on Thursday and that French bond stress is the key issue for the meeting, noting that France's 10-year yield had risen above 5%.

Yen eases as Tokyo repeats intervention readiness

The yen was among the best-performing major currencies last week, strengthening around 0.75% against the dollar for its biggest weekly gain since early September, as AI-related jitters in equities drove demand for the currency, Reuters said. On Tuesday, Japanese Finance Minister Satsuki Katayama said the government stood ready to take decisive action in the currency market, a reminder of Tokyo's willingness to support the yen.

Data released Tuesday showed a key gauge of Japan's service-sector inflation rose 3.7% in September from a year earlier, which Reuters described as a sign of price pressures likely to keep the Bank of Japan on track for further rate increases. FXStreet's week-ahead analysis said the BOJ is expected to hold its policy rate at 1.25% on Friday while possibly raising its fiscal 2027 inflation forecast.

Beyond central banks, traders are watching quarterly earnings this week from AI hyperscalers Alphabet, Microsoft and Amazon.com, which Reuters said will test the broader market story.