Currencies

Dollar to rebound ahead of Fed meeting: CNBC poll

Dollar to rebound this week: CNBC poll
VIDEO1:5901:59
Dollar to rebound this week: CNBC poll

The U.S. dollar is likely to rebound this week on expectations that the Federal Reserve will approve a "gradual" withdrawal of bond purchases at a monthly rate of $10 billion, CNBC's latest poll of currency traders, analysts and strategists showed.

Two-thirds of CNBC poll respondents (14 out of 21) said they believed the U.S. dollar would recover after falling to a seven-week low against the Japanese yen on Friday.

"FOMC (Federal Open Market Committee) officials have given no signal the Fed will delay tapering this month," said Mansoor Mohi-uddin, head of foreign exchange strategy at UBS.

Scott Eells | Bloomberg via Getty Images

"Policymakers are unlikely to surprise markets at Chairman Bernanke's last meeting before he retires at the end of the month."

Last week's sell-off in emerging markets and stock markets "shouldn't be sufficient to cause policymakers to pause tapering," he added.

Flight to Safety

In fact, the drop in the dollar late last week represents "a buying opportunity" ahead of the FOMC meeting, according to Ray Attrill, co-head of forex strategy at NAB, in the run-up to the "more important" fourth-quarter U.S. gross domestic product (GDP) data.

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Attrill said NAB issued a "buy" recommendation on the dollar against the Swiss franc on Friday and added that he holds a bullish view overall for the greenback this week.

Dollar bears, however, argue that the greenback will put in a mixed performance this week and may stumble against the Japanese yen and Swiss franc if further turmoil in emerging markets prompts a flight into those safe-haven currencies.

(Read more: Markets could be further whipped up ahead of the Fed)

One-third of those polled (7 out of 21) expect the dollar to extend declines this week.

Moreover, should the Fed act in line with market expectations and taper by $10 billion, "this could trigger a 'sell on the news' reaction" in the dollar, said Hans Goetti, head of investment, Asia at BIL.

But he added: "We remain bullish on the USD in the medium term since we expect the ECB (European Central Bank) to aggressively expand its balance sheet this year and emerging market currencies to weaken further."

(Read more: Emerging-market currency 'contagion' spreads)

Mirza Baig, Asia currency strategist at Deutsche Bank, said the dollar would continue to decline this week against the euro, yen and Swiss franc, but would gain against the Australian dollar and emerging market currencies.

Meanwhile, "renewed concerns about a China slowdown" are expected to add to "USD gains against Asia," Callum Henderson, global head of forex research at Standard Chartered, added.

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