Dollar trades in tight range against euro, yen before key Fed decision on interest rates

Dollar trades in tight range before Fed meeting

NEW YORK — The dollar traded in a tight range Monday against the euro and yen ahead of a key meeting of Federal Reserve policymakers that could have broad implications for the dollar’s value.

The Fed committee meets Tuesday and the dollar often reacts sharply to any policy changes on interest rates or revisions in the Fed’s outlook for the economy.

In late afternoon trading in New York, the euro rose to $1.3062 from $1.3043 late Friday. The dollar edged lower to 85.77 yen from 85.79 yen.

If the central bank on Tuesday signals that it will start buying up Treasurys to help support the economy, the dollar could tumble broadly, MF Global analyst Jessica Hoversen said.

Such a move by the Fed would likely drive interest rates lower, which tends to weigh on the dollar.

Most analysts do not expect the central bank to announce the start of such a program Tuesday, however. Federal Reserve Chairman Ben Bernanke had said late last month that the economy would have to decline significantly to prod the Fed into further action.

Worries that the Fed will do more to bring down rates have already driven the dollar down by more than 2 percent since late August against a group of six actively traded currencies.

Last week, concerns about weak U.S. growth and expectations of a move by the Fed helped drive the dollar to a 15-year low of 82.88 yen, just before the Bank of Japan intervened in currency markets to weaken the yen. The dollar has largely held on to its gains versus the Japanese currency since Japan’s intervention.

The euro had hit a five-week high of $1.3159 in Friday’s trading following Japan’s move.

In other trading Monday, the British pound fell to $1.5545 from $1.5625 while the dollar slipped to 1.0287 Canadian dollars from 1.0311 Canadian dollars and to 1.0061 Swiss francs from 1.0102 Swiss francs.