Dollar holds gains ahead of Fed

SYDNEY (BestGrowthStock) – The dollar retained gains on Tuesday ahead of a meeting of the U.S. Federal Reserve later in the day while the euro stayed under pressure despite a rescue mechanism put in place for Greece by euro zone ministers.

The U.S. central bank’s Federal Open Market Committee starts a one-day meeting on Tuesday where it is expected to reiterate its vow to keep interest rates very low for an “extended period.”

But market participants will closely watch the number of dissenters after recent economic data showed U.S. consumers are buying more and firms appear to be on the verge of hiring again.

Kansas City Fed President Thomas Hoenig dissented at the Fed’s last meeting, saying conditions had improved sufficiently to warrant dropping the “extended period” phase.

In early Asian trade, the dollar index (Read more about the global trade. ) (.DXY: ) was up at 80.23, with near term resistance seen around 80.85, its March 10 high. Any change in the Fed’s language is likely to provide a boost to the U.S. dollar, but chances of that happening are pretty low, traders say.

“We believe that the ‘low for long’ wording will be left unchanged,” JP Morgan said in a morning report. “Such an outcome could suppress the market expectation for the Fed’s early hikes and exert pressure on the U.S. dollar.”

The euro was flat at $1.3675, having retreated from $1.3776 in the previous session where it fell to as low as $1.3637. It received a modest lift from the latest comments from euro zone finance ministers.

The ministers agreed on a mechanism that would allow them to help Greece financially if needed, although no financial details were available. Traders said the lack of financial details meant no concrete progress was made and the single currency was likely to stay under pressure.

Against the yen, the euro was at 123.70 yen, barely changed from 123.76 late in NY.

The U.S. dollar ceded some ground against the yen, easing to 90.36 yen from around 90.48 yen late on Monday in New York. The Japanese currency has been struck in a narrow range ahead of a Bank of Japan (BOJ) meeting where it is expected to relax its already ultra-loose policy to fight deflation.

But the BOJ board appears split and any hesitancy to loosen policy could lift the yen, traders say.

Solid near term resistance for the yen is seen around 89.60 levels, the high struck on March 9.

The BOJ ends a two-day meeting on Wednesday and it is likely the bank will announce more easing measures, like boosting the size or duration of special fund-pumping operations.

Meanwhile, the Australian dollar slipped to $0.9133 ahead of the release of the Reserve Bank of Australia minutes of its March policy. It raised rates by 25 basis points at that meeting and the minutes are likely to reiterate a hawkish bias and could help the Aussie recover some ground.

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(Reporting by Anirban Nag; Editing by Mark Bendeich)

Dollar holds gains ahead of Fed