Forex Market Review – Dollar trims gains ahead of Fed meeting

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EURUSD fell to a fresh two-month low in the Asian trading session as market sentiment continued to remain damp following from Monday. There is mounting concern that the ratings of the euro zone countries will be cut because the EU Summit provided little to tackle the immediate debt crisis. EURUSD opened Asia at 1.3186 and fell early to 1.3159 before bouncing to 1.3204 on short-covering as well as profit-taking.

 

Bond auctions in Italy and Spain on Wednesday and Thursday respectively, will put euro under further pressure if yields are high.

 

The US dollar trimmed recent gains as investors are waiting to see the outcome of the US Fed policy meeting later today and what their view is of the US economy. Recent economic data indicate that the US is not in a recession and is seen as steady so the Fed is not expected to increase quantitative easing and the interest rate is expected to remain unchanged at 0.25 percent. Retail sales are also due and are forecast to increase slightly.

 

The weakening dollar in the Asian session helped lift risk currencies. Apart from euro, sterling also bounced against the dollar to 1.5618 from 1.5572.

 

The Australian dollar edged up to 1.0094 from 1.0029 against USD.

 

The yen gained against the dollar, with USDJPY falling to 77.82 from the open level of 77.90.