Dollar steady ahead of Fed meeting

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Tokyo - The dollar held steady in Asia on Tuesday ahead of a key US Federal Reserve policy meeting, while the euro won support from upbeat business activity data for the embattled eurozone.

The greenback fetched 103.05 yen in Tokyo, compared with 103.02 yen in New York on Monday, while the European single currency inched up to $1.3767 and 141.85 yen from $1.3761 and 141.77 yen.

“The focus ahead will be firmly on the Fed” meeting, Credit Agricole said, adding that there is an element of caution in the market as the outcome it largely uncertain.

Data on Monday showed US industrial output expanded 1.1 percent in November with manufacturing showing a fourth consecutive monthly gain.

The news added to speculation that the central bank will this week announce a wind-down its $85-billion a month bond-buying programme.

Adding to downward pressure on the yen is a growing sense that the Bank of Japan will boost its own monetary easing scheme after a sharp slowdown in third-quarter economic growth - despite an upbeat business sentiment survey on Monday. The bank holds a two-day policy meeting from Thursday.

“It is highly unlikely that the Bank of Japan adjusts policy at its meeting later this week but further action next year remains likely,” Credit Agricole said.

The euro enjoyed support thanks to figures showing business activity in the 17-nation eurozone ticked up in December.

Markit Economics said its eurozone composite purchasing managers index (PMI) rose to 52.1 from 51.7 in November. Anything above 50 is considered growth and anything below points to contraction.

Manufacturing led the upturn, with output rising for the sixth straight month. For services however, the rate of growth slowed for the third consecutive month.

The euro has seen healthy buying since the European Central Bank this month held off any new interest rate cuts despite prolonged low inflation. That followed a surprise cut in November of its central refinancing rate by a quarter-point to counter the threat of deflation.

The latest eurozone inflation figures are due out later on Thursday. - AFP

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