The dollar held a two-day decline versus the euro on bets U.S. policy makers meeting this week will say they intend to keep interest rates at a record low for an extended period even as they end bond buying.
A gauge of the U.S. currency headed for its first monthly loss since June as traders cut the probability the central bank will raise borrowing costs by October 2015 to a 49 percent chance from 85 percent odds at the end of last month. The Fed starts a two-day meeting today. The yen fell against all except two of its 16 major peers before the Bank of Japan sets policy this week with some economists predicting an expansion of monetary stimulus.
“The key is going to be the tone of the Fed’s statement, and I think the tone will be extremely cautious,” said Yuki Sakasai, a foreign-exchange strategist at Barclays Plc in New York. “In the near term, the dollar is going to be heavy.”
The dollar weakened 0.1 percent to $1.2709 per euro at 11:05 a.m. in Tokyo after declining 0.4 percent during the previous two days. The U.S. currency was little changed at 107.87 yen after declining to 108.38 yen yesterday, the weakest since Oct. 8. The yen fell 0.1 percent to 137.09 per euro.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, was little changed at 1,066.35. It has dropped 0.4 percent this month.
The Federal Open Market Committee indicated at its September meeting that it planned to end its quantitative-easing programs this month. Policy makers have kept their key interest rate at zero to 0.25 percent since December 2008.
Source: Bloomberg (28 Oct 2014)
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