Dollar weakens ahead of Fed policy statement

NEW YORK – The dollar weakened Tuesday against the euro as traders kept an eye on the two-day meeting of Federal Reserve policymakers which will conclude Wednesday.

At 2100 GMT, the euro was trading at $1.3192, up from $1.3159 late Monday.

The yen dipped against the two major currencies after Monday’s surge meanwhile: the dollar rose to 81.36 yen from 81.16 yen, while the euro was at 107.35 yen from 106.79 yen.

The Fed’s policy board began meeting Tuesday amid more signs of the economy’s tepid growth: still-weak home sales and a drop in consumer confidence.

Most analysts assume the central bank will keep its ultra-low interest rate policy unchanged, but eyes will be out when they release their report Wednesday for signs of whether they think more stimulus is needed for growth.

“Consumer confidence has already in our view peaked. We haven’t managed to break above where we were at the peak in 2011,” said David Mann at Standard Chartered Bank.

“So that is one of the factors that are (fuelling) creeping doubts over how strong the US recovery actually is. It could be a reason why the dollar is down against the euro,” he said.

“If the US economy isn’t doing so well, it can increase the probability of even more easing” from the Fed. “That could be a negative for the currency,” he said.

The British pound kept its ten day rally against the dollar intact, rising to $1.6145 from $1.6131.

The dollar slipped to 0.9106 Swiss francs from 0.9132 francs.