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FOREX-Dollar on defensive as market awaits Fed decision, euro edges up

Published 20/03/2019, 11:39 am
© Reuters.  FOREX-Dollar on defensive as market awaits Fed decision, euro edges up
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* Dollar down nearly 1.4 pct since March 7

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Daniel Leussink

TOKYO, March 20 (Reuters) - Major currencies stuck to tight ranges in early Asian trading on Wednesday as investors awaited the outcome of the Federal Reserve's March policy meeting later in the day.

Against a basket of key rival currencies .DXY , the dollar was broadly steady at 96.388 after hitting its lowest level since March 1 at 96.291 in overnight trading.

The index has lost almost 1.4 percent after climbing to a three-month high of 97.71 on March 7, on views the Fed will strike a dovish tone during its latest policy meeting.

Investors are focused on the Fed to see whether the central bank will affirm its commitment to "patient" monetary policy and for clues about the likely path of U.S. borrowing costs.

The Fed is due to make its rate announcement at 1800 GMT on Wednesday, when it is expected to keep its benchmark overnight interest rate unchanged.

"The dollar continued its drift lower but momentum seems to be waning on the move as volatility across the majors continues to fall," said Nick Twidale, chief operating officer at Rakuten Securities Australia in Sydney.

"The market is poised for potential break out trades if the FOMC (Federal Open Market Committee) surprises later today," he said in a note.

Most currencies stayed within well-trodden trading ranges before the Fed decision, as market participants were cautious after taking cues from U.S. data offering new signs the world's top economy is on a path of slower growth.

New orders for U.S.-made goods rose less than expected in January and shipments fell for a fourth straight month, offering more evidence of a slowdown in U.S. manufacturing activity, overnight data showed. positive signs were evident in Germany as a survey by the ZEW research institute indicated the mood among German investors improved more than expected in March, as a potential delay to Britain's exit from the European Union helped lift sentiment. Wednesday, the euro EUR= was a shade higher against the greenback at $1.1355, while the yen JPY= was down a tad at 111.51 yen per dollar.

Investors also kept a check on developments related to the U.S.-China trade war as a U.S. government official said U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin plan to travel to China next week for another round of talks with Chinese counterparts. don't think anyone is expecting a quick resolution to this problem any time soon. For the time being, the market will keep reacting to the headlines as they come and go," said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

Sterling GBP=D4 was steady at $1.3267 after paring gains overnight on concerns that British Prime Minister Theresa May's request for delaying Brexit was running into complications with the European Union. by Sam Holmes)

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