April 25, 2012 / 3:45 PM / in 6 years

FOREX-Euro touches then falls from 3-wk high vs dollar; Fed ahead

* Euro reaches three-week high vs dollar but falls before
Fed statement
    * Sterling falls from seven-month peak after UK GDP

    NEW YORK, April 25 (Reuters) - The euro pulled back from a
three-week high against the dollar hit earlier on Wednesday as
investors repositioned ahead of a policy statement from the U.S.
Federal Reserve.	
    Most traders expect the Federal Reserve to restate its
intention to keep rates near zero throughout 2014 and possibly
hint at more easing, especially after recent weaker jobs data.
Such comments could be positive for the single
    However, traders expected any gains in the euro on the Fed
statement to be limited as the currency remained vulnerable to
budget problems and political uncertainty in several euro zone
     "Market participants will remain focused on any changes to
the (Fed) statement, given that the Fed decision will have
incorporated updated forecasts for inflation, employment and
growth," said Eric Theoret, currency strategist at Scotiabank in
Toronto. "The press conference should see Fed Chair Bernanke
remain cautious on the economic outlook given the moderate pace
of growth, the elevated level of unemployment, and the fiscal
uncertainties as we head toward year-end."	
    The euro rose as high as $1.3235, according to
Reuters data, supported by relief as successful debt auctions on
Tuesday sent yields on Dutch, Spanish and Italian bonds lower.
But it last changed hands at $1.3184, down 0.1 percent, and just
off the session low of $1.3179.  	
    The Fed statement is scheduled for 12.30 p.m. EDT, with an
accompanying news conference later on Wednesday.	
    Some analysts said a deviation from expectations with a more
hawkish statement, pointing to improvements in the economy and
dimming chances of more stimulus, could give the dollar a strong
    "Developments coming out of the central bank may prop up the
reserve currency should the committee continue to soften its
dovish tone for monetary policy," said David Song, currency
analyst at DailyFX.    	
    Sterling fell from a seven-month high against the
dollar after data unexpectedly showed the UK economy slid into
recession after contracting during the first quarter.
    This curbed demand for the UK currency, which has attracted
strong support recently as an alternative to the euro during
heightened concerns about budget problems in Spain and other
smaller euro zone economies.	
    Sterling was last down 0.1 percent at $1.6120.	
    The dollar, which earlier fell to a three-week low versus
the Swiss franc before recovering to trade little changed
at 0.9114 francs, was also little changed against the
low-yielding Japanese yen to 81.38 yen, though it stayed
above the previous session's one-week trough.	
    Analysts said the yen could come under pressure as market
players position for a Bank of Japan meeting on Friday, when it
is expected to increase asset purchases by up to 10 trillion yen
($123 billion).
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