The dollar has dipped against the euro as investors await the outcome of the Federal Reserve’s monetary policy meeting for signs of when the Fed will hike interest rates.
The Federal Open Market Committee (FOMC) is not expected to announced an increase in its ultra-low rate at the end of the two-day meeting Wednesday, but analysts were waiting on Tuesday to see if the Fed’s outlook on when it might has moved up from the 2015 estimate most policy makers held in December.
The euro edged up to $US1.3932 around ,2100 GMT (0800 AEDT) compared with $US1.3921 on Monday.
The dollar also slipped against the Japanese currency, to 101.42 yen from 101.68 yen. The euro fell to 141.29 yen from 141.58 yen.
Markets were geared up for the first FOMC meeting headed by Fed Chair Janet Yellen, who will give her first news conference since taking over the helm of the central bank from Ben Bernanke on February 1.
The FOMC is widely expected to reduce asset purchases, known as quantitative easing, for a third month in a row by another $US10 billion, to $US55 billion a month, as it cuts back stimulus with the US economy slowly improving.
Many analysts also predict that the central bank will drop its unemployment rate threshold of 6.5 per cent for considering tightening interest rates in favour of qualitative guidance, since the unemployment rate has fallen faster than anticipated and now stands close at 6.7 per cent.
The closely watched FOMC statement will be accompanied by economic projections on growth, unemployment and inflation.
“The dollar would benefit from a statement that maintains that the recent slowdown in growth was largely weather-related and that the Fed’s glide path to winding down its quantitative easing program by the end of this year remains intact,” said Omer Esiner of Commonwealth Foreign Exchange.
Kathy Lien of BK Asset Management noted that the euro has been “extremely resilient in the face of the ongoing crisis between Russia and the Ukraine.”
Russia’s complete rejection of the West’s calls to de-escalate tensions should have led to a flight to US dollars from euros, she said, “but the EUR/USD held steady as investors latched onto the hope that Russia’s incursion into Ukraine will stop at Crimea.”
The dollar ticked up to 0.8732 Swiss franc from 0.8729 franc Monday.
The British pound fell to $US1.6587 from $US1.6635.