Reuters: US Dollar Report: FOREX-Dollar index at 3-week low, euro up before FOMC

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FOREX-Dollar index at 3-week low, euro up before FOMC Apr 25th 2012, 08:42 Wed Apr 25, 2012 4:42am EDT * Dollar index hits 3-week low, euro supported * Focus on Federal Reserve meeting * Corporate earnings lift stocks, risk appetite * Sterling falls after UK GDP contracts By Jessica Mortimer LONDON, April 25 (Reuters) - The dollar fell to a three-week low against a basket of currencies and the euro held near recent highs as strong company earnings boosted investors' appetite for risky assets and the U.S. central bank was expected to keep interest rates ultra-low. Investors were relieved when successful debt auctions sent yields on Dutch, Spanish and Italian debt lower on Tuesday, but traders said the euro remained vulnerable given budget problems and political uncertainty in several euro zone countries. The dollar, which is seen as a safe haven, fell to a three-week low against a currency basket, with the index dropping to 79.065, as the Federal Reserve was expected to restate its intention to keep interest rates near zero throughout 2014. The focus will be on whether policymakers hint at further easing, especially after recent weaker U.S. jobs data. The euro rose 0.1 percent to $1.3206, close to last week's peak of $1.3225, with traders saying it could extend gains if stop loss buy orders were triggered above $1.3230. "Euro/dollar is gradually drifting lower but not as quickly as many in the market thought, possibly because peripheral yields haven't risen too much," said Paul Robson, currency strategist at RBS. "The FOMC will be important, especially the Bernanke press conference and the market will be looking for any language change on Operation Twist and on the balance of risks around the economy, especially given the disappointing U.S. jobs report". Traders said further gains would see the euro target chart resistance at 1.3236, the 61.8 percent retracement of its slide from $1.3386 in late March to just below $1.30 on April 16. However, analysts said the outcome of the Fed meeting was uncertain. A more hawkish statement, pointing to improvements in the economy and dimming chances of more stimulus, would come as a surprise to the market and would give a boost to the dollar. "Assuming that the Fed does not alter its policy setting but instead only tinkers with its economic forecasts, the dollar will escape any further selling pressure," said Mitul Kotecha of Credit Agricole Corporate and Investment Bank, adding he did not expect the bank to mention loosening monetary policy. STERLING FALLS Sterling fell after data unexpectedly showed the UK economy slid into recession after contracting during the first quarter. The risk-sensitive Australian edged higher, trading up 0.1 percent at $1.0330 as European stocks rose, supporting by forecast-beating corporate results which soothed investors' worries over the earnings season. The yen could come under pressure as market players position themselves for a Bank of Japan meeting on Friday, when it is expected to ramp up asset purchases by up to 10 trillion yen ($123 billion). A senior dealer for a major Japanese bank in Tokyo said that unless the BOJ surprised the market, the dollar would find it hard to rise against the Japanese currency. The dollar was steady against the yen at 81.28 yen, above the previous session's trough of 80.86 yen. Link this Share this Digg this Email Reprints

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