Channel NewsAsia

Dollar gains against euro on eve of Fed meeting

The dollar rose a tick against the euro on Monday on the eve of the Federal Reserve's two-day monetary policy meeting, widely expected to further taper the central bank's huge stimulus.

NEW YORK: The dollar rose a tick against the euro on Monday on the eve of the Federal Reserve's two-day monetary policy meeting, widely expected to further taper the central bank's huge stimulus.

The euro traded at $1.3670 around 2200 GMT, compared with $1.3675 at the same time Friday.

The dollar made some headway against the yen, buying 102.56 yen, up from 102.33 yen. In earlier Asian trading the greenback hit a seven-week low of 101.77 yen.

The euro also rose against the Japanese currency, at 140.21 yen up from 139.96 yen Friday.

The euro earlier in the day had climbed after upbeat data on Germany, Europe's largest economy, added to evidence of a growing recovery in the eurozone.

The Ifo economic institute said its closely watched German business climate index climbed to 110.6 points in January, up from 109.5 points in December, and that the outlook was the most optimistic in almost three years.

But the Federal Reserve meeting on Tuesday and Wednesday was the market's main concern.

Despite last Friday's global market turmoil, sparked by worries about emerging-market economies after Argentina's sudden devaluation of its peso combined with concerns about China's slowing economy, most analysts expect the Fed will announce Wednesday a $10 billion reduction in its monthly asset purchases, to $65 billion.

The Fed announced in mid-December it would begin tapering the stimulus that has pressed down long-term interest rates in a bid to support the US economic recovery, setting the first taper, of $10 billion, for January.

"The rebound in US (bond) yields and sell-off in US stocks suggests that investors are preparing for another round of tapering this week from the Federal Reserve," said Kathy Lien of BK Asset Management.

Eric Viloria, currency strategist at Wells Fargo Securities, said that market expectations for the Fed to continue further cut the asset purchases "should be supportive for the US dollar and therefore we maintain an upward bias for the greenback."

The dollar firmed to 0.8969 Swiss franc from 0.8943 franc Friday.

But it fell against the British pound, a day ahead of the government's report on fourth-quarter economic growth. The pound bought $1.6579, up from $1.6479.

"There's scope for an upside surprise" in gross domestic product growth in Britain, Lien said.

Tweet Photos, Videos and Update on this Story to  #cna