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Greenback steady ahead of Federal Reserve meeting

A money changer counts US dollar notes in Singapore on Friday. The dollar was stuck in a narrow range in Asian trade on Friday after weak US industrial activity data and low inflation dampened the prospects for a more aggressive series of US interest rate hikes, dealers said. PHOTO: AFP

The dollar was steady to slightly higher on Friday, remaining motionless for much of the session amid low Treasury yields and a Federal Reserve meeting scheduled for next week.

In late trading on Friday, the euro was slightly lower at US$1.2178 from US$1.2188 late Thursday.

The dollar was up at ?109.91 from ?109.63, and at 1.2689 Swiss francs from SF1.2670. The pound was a bit lower at US$1.7933 from US$1.7940 on Thursday, while the dollar was higher against the Canadian dollar at C$1.2972 from C$1.2900.

The greenback started the day mostly higher but faded as the University of Michigan consumer sentiment data came in slightly below expectations, with a fall to 95.8 this month from 95.9 last month.

The main focus of attention, however, was on Tuesday's US interest rate decision by the Federal Reserve's Federal Open Market Committee and trading therefore continued to be confined to tight ranges.

"There wasn't a huge reaction to the Michigan data, and we're likely to be in for some more sideways trading ahead of the [Federal Open Market Committee] meeting next week," said Paul Bednarczyk, currency strategist at 4CAST.

"Trade was very thin as market participants took a wait-and-see stance with no fresh incentives ahead of a three-day weekend in Tokyo and the FOMC on Tuesday," said Ryohei Muramatsu, senior currency trader at Commerzbank AG in Tokyo.

Traders said that the foreign exchange market has stalled.

"The market is waiting for something to happen, but we don't know what," said John McCarthy, director of foreign exchange at ING Capital Markets in New York.

The market widely expects a quarter-point increase on Tuesday but is less certain about the aggressiveness of Fed rate hikes in coming months, however, and will look for clues from policy-makers next week.

A 25 basis-point hike, taking the US Fed fund rate to 1.75 percent, was already seen as fully priced in by the market, and the Fed's accompanying statement was therefore seen as key.

Overall, however, the data did not bode well for the US economic recovery, with a number of negative factors hitting consumers such as high oil prices, rising interest rates and the fading stimulus of past tax cuts, said Paul Ashworth, economist at Capital Economics.

"The absence of any rebound in today's confidence report suggests that the consumer slowdown evident in the recent data will not be reversed any time soon," he said.
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