Dollar flat before Fed meeting, U.S.-China trade talks

NEW YORK (Reuters) - The dollar was little changed against a basket of currencies on Monday as traders were cautious about staking new positions ahead of the Federal Reserve’s two-day policy meeting and trade talks between China and the United States.

FILE PHOTO - U.S. Dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration

Safe-haven demand for the dollar dried up as the U.S. government started to reopen after a record-long shutdown, and investors were bracing for a slew of economic figures that had been postponed.

“This could be the calm before the storm,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. “It feels like a consolidation day with a risk-off bias.”

The euro reached a 10-day high against the greenback as investors consolidated positions before votes in the British parliament on Tuesday aimed at breaking a Brexit deadlock.

At 3:14 p.m. (2014 GMT), the ICE index that tracks the dollar versus the euro, yen, sterling and three other currencies was down 0.04 percent at 95.751. It hit a near two-week low at 95.673 earlier Monday.

Policy makers on the Federal Open Market Committee (FOMC) begin meeting on Tuesday. They are expected to signal a pause in tightening and acknowledge growing economic risks.

U.S.-China talks resume on Tuesday and Wednesday to see if the world’s two largest economies can end their trade dispute.

“The market will take it as a positive if they keep talking,” said Kristina Hooper, global market strategist at Invesco in New York.

The yuan was steady against the greenback in offshore trading at 6.7555 per dollar.

Negotiations have been complicated by the arrest of Meng Wanzhou, the chief financial officer of Huawei Technologies Co Ltd, a huge Chinese telecom company, for alleged violations of U.S. sanctions against Iran.

The U.S. Justice Department is expected to announce criminal charges related to Huawei, four sources told Reuters on Monday.

The euro rose to a near two-week peak at $1.1444. It last traded 0.20 percent higher at $1.1428.

Recent economic readings on Germany and France have been weak and the European Central Bank is expected to remain dovish. Still, traders believe these factors are already priced into the euro.

Sterling declined following its biggest weekly rise in more than 15 months. With the United Kingdom set to leave the European Union on March 29, lawmakers have set votes in parliament on Tuesday over terms for Brexit.

The pound was down 0.29 percent at $1.3159, while the euro was up 0.44 percent at 86.85 pence.

Additional reporting by Tom Finn in LONDON; Editing by Larry King, David Gregorio and Sonya Hepinstall