Dollar Eases, With Fed, German Ruling In Focus

The U.S. dollar eased against major global currencies on Tuesday, reflecting caution ahead of this week’s Federal Reserve meeting, where the central bank may decide on further bond purchases to stimulate the economy.

The ICE dollar index DXY, a gauge of the greenback’s moves six other major currencies, fell to 80.299 from 80.408 in North American trade late on Monday.

The Federal Open Market Committee is due to announce its decision Thursday after a two-day meeting.

The euro EURUSD inched higher to $1.2774 from $1.2764, as focus remained on Wednesday’s ruling by Germany’s constitutional court on the legal challenges to the country’s participation in the European Stability Mechanism.

“In the absence of any economic releases in Europe [Tuesday], focus will be on political developments, starting with the German vote on ESM constitutionality,” Credit Agricole currency strategist Sireen Harajli wrote to clients.

“Today’s [U.S.] trade-balance figures may cause a small reaction in [the dollar], but the focus will still be on the [Fed] announcement on Thursday, with the expectation that the Fed will announce more policy accommodation, keeping the dollar under pressure,” Harajli said.

Among other major currency pairs, the British pound GBPUSD was fetching $1.6012, reclaiming the $1.60-handle, from $1.5995 in the U.S. on Monday.

Against the Japanese yen, the dollar USDJPY was changing hands for ¥78.19, down from ¥78.31.

The Australian dollar AUDUSD was trading at $1.0341, up a bit from $1.0336.

Marketwatch