Dollar Up After Cyprus Vote, Before FOMC Meet

The dollar gained in Asia trading hours on Wednesday, after the Cypriot parliament rejected a bailout proposal and ahead of a policy meeting at the U.S. Federal Reserve.

The ICE dollar index , which measures the greenback against a basket of six rival currencies, traded at 82.985, from 82.893 in late trading on Tuesday.

The WSJ dollar index , which measures the greenback against a slightly wider currency basket, reached 73.71, from 73.66 in late trading Tuesday.

The euro declined to $1.2872, from $1.2898 late the previous session, after parliament in Cyprus late Tuesday rejected a financial rescue plan put forward by the country’s international creditors and the government.

The move left plans to shore up the country’s banking sector in disarray.

“Cyprus remains the main macro concern, and the twists and turns in this saga continue to subtract sentiment from the euro and feed safe-haven asset appreciation,” said Chris Weston, chief market strategist at IG Markets.

Meanwhile, the Federal Open Market Committee’s monthly policy meeting takes place later in the global trading day Wednesday.

Bernanke and his colleagues are widely expected to hold policy steady at their meeting and economists said the Fed’s economic forecasts might contain the only surprises.

“The main issue for us is the Fed’s view on the unemployment rate, with the board having a consensus target of just over 7.7% for the full-year,” said Weston at IG Markets.

“If the board acknowledges the strength in the labor market and cuts this target, this invariably would cause strong inflows into the U.S. dollar,” Weston said.

Still, Weston wasn’t expecting such a move on Wednesday. “While we don’t rule out a change here, we feel the Fed will want further evidence before cutting its forecasts to say 7%,” he said.

The British pound reached $1.5085, from $1.5101 late the previous session, while the Australian dollar reached $1.0376, after rising 0.1% in the Asia session.

Against the Japanese yen , the dollar traded at 95.03 yen, unchanged from the level in late trading Tuesday.

Marketwatch

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