Euro, Yen Steady as FOMC Looms
01/29/2013| 07:56am US/Eastern
-- Euro stays mostly range-bound in quiet trade
-- Major currency bets on pause ahead of FOMC, US jobs data
-- Aussie and Kiwi dollars supported as local economic data improves
-- Hungary may cut interest rates despite weak forint
By Alexandra Fletcher
The euro and yen were mostly steady against the dollar in quiet European trade Tuesday as currency dealers hunkered down ahead of key U.S. jobs data and a Federal Reserve policy update due later this week.
Europe's single currency came under brief pressure against the dollar to trade as low as $1.3414 early in the session, but the move was short-lived as dealers shrugged off more bad news from Spain. Spanish retail sales fell 10.7% in December from the same corresponding a year earlier, providing further evidence that Spain's economic recession deepened in the final months of last year.
The dollar eased slightly against the yen, shedding around 0.7% of its value from the highs made in Asian trade after the cabinet of Japanese Prime Minister Shinzo Abe approved a record 92.6 trillion yen ($1.02 trillion) draft budget for the fiscal year ahead to help boost the country's ailing economy.
The pound was modestly stronger against the buck, after sliding Monday to its lowest level since Aug. 21, amid expectations of more aggressive policy easing to combat weak U.K. growth.
The moves were fairly muted as investors awaited the latest health check on the world's biggest economy, with the publication Friday of U.S. non-farm payrolls data and the Federal Open Markets Committee meeting Wednesday.
"Markets are paused because of a lack fresh impetus ahead of the FOMC and non-farm payrolls," said Paul Robson, head of European FX strategy at the Royal Bank of Scotland in London.
But he warned that investors hoping for more clues on when the Fed might exit its asset-purchasing program may have to wait until the release of the Fed's next set of minutes Feb. 20.
"The FOMC announcement is likely to be a non-event but the minutes from the meeting will be important as investors look to the Fed to begin some kind of exit strategy from accommodative monetary policy given that there are signs of a U.S. economic recovery," Mr. Robson said.
The Australian dollar was steady against the greenback at around $1.0450, hanging onto gains made overnight after the Australian business confidence index rose sharply in December.
Elsewhere, the euro was weaker against the Hungarian forint after the single currency broke the technically important level of HUF300 Monday. Interest rate-setters in Hungary are due to meet at 1300 GMT and are expected by some analysts to cut rates for a sixth time to take the country's key policy rate to 5.5% from 5.75%.
"Recent weakness in the forint...is seen as the biggest restraint on another rate cut today. However, we doubt it will prevent one," said Chris Turner, head of FX strategy at ING, in a note to clients.
Looking ahead, a slew of U.S. data, including business confidence, kicks off at 1400 GMT.
At 1210 GMT, the euro was trading at $1.3432 against the dollar, compared with $1.3442 late Monday in New York, according to trading system EBS. The dollar was at Y90.53 against the yen, compared with Y90.84, while the euro was at Y121.60, compared with Y121.65. Meanwhile, the pound was trading at $1.5733 against the dollar, compared with $1.5694 late Monday in New York.
The Wall Street Journal dollar index, which tracks the U.S. dollar against a basket of currencies, was at 70.982 from about 71.039.
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