The dollar was mixed as investors bided time ahead of the Fed meeting

The dollar was mixed as investors bided time ahead of the Fed meeting

The dollar was mixed against major currencies on Tuesday, rising against the yen and commodity currencies as investors bided their time ahead of the Federal Reserve’s policy decision on Wednesday.

After world stocks began the week at a record high, the safe-haven greenback was lastly out of favor for most weeks, although a pullback in global equities on Tuesday helped hold it above recent lows.

Currency trading was relatively subdued ahead of the Fed’s two-day meeting, which ends on Wednesday and is expected to yield no policy changes.

Markets will be closely watching a speech by Fed Chairman Colin Powell, who is likely to address concerns and questions about whether improving economic conditions warrant an exit from easy money policies. But analysts expect Powell to stick to the Fed’s ultra-accommodative stance, which will weigh on Treasury yields and the dollar.

The dollar added 0.4% to 108.50 yen, another haven currency, continuing its rise from the seven-week low of 107.48 reached Friday.

The yen showed a muted response after the Bank of Japan kept its monetary policy on hold as widely expected.

The dollar has dropped nearly 3% since late March, as U.S. Treasury yields have traded in tight ranges since withdrawing from a 14-month peak of 1.7760%, reducing the currency’s yield appeal.

The euro was slightly down at $1.2078, but not far from the two-month high of $1.2117 reached Monday.

The Australian dollar, a commodity-linked gauge of risk appetite, fell 0.4% to US$0.7771 after rising 0.7% the previous day to near a five-week high.

The Chinese yuan fell 0.1% to 6.4789 against the dollar after rising to a seven-week high of 6.4710 on Monday.

Damon Harrison
Market Analyst, IPG Group