Dollar mixed in Asian trade ahead of Fed meeting

Dollar mixed in Asian trade ahead of Fed meeting

TOKYO - The dollar was mixed in cautious Asian trade Thursday ahead of next week's US Federal Reserve policy meeting that could see the bank announce a wind down its stimulus programme.

The greenback fetched 102.58 yen in Tokyo, up from 102.40 yen in New York Wednesday but still off levels around 103.30 yen earlier this week. The euro strengthened to US$1.3792 (S$1.73) and 141.47 yen compared with US$1.3785 and 141.19 yen.

Dealers said there were few fresh factors to drive business with some investors buying the US unit on dips.

A series of strong US data recently - including falling unemployment and strong economic growth - have led many analysts to bet the Fed will cut its bond-buying this month.

And on Tuesday those expectations were amplified when Democrats and Republicans announced a two-year budget deal which, if passed by Congress, would avert a shutdown crisis such as the one that paralysed Washington in October.

Economists said the news had given the Fed - which has expressed concern over Washington's repeated policy brinksmanship - more ammunition to chip away at its US$85 billion a month asset purchase programme.

"It's important to remember that the budget standoff was the main reason for the Fed to delay tapering in September," Benjamin Schroeder, strategist at Commerzbank, told Dow Jones Newswires.

Investors are also keeping a close eye on US November retail sales later in the day as they will provide more clues about the state of the economy.

The central bank has said it will only start reeling in its stimulus once the world's biggest economy is on a firm footing. The Fed's two-day policy meeting starts on December 17.

"We expect the solid US retail sales number, if anything, to reinforce market expectations of tapering sooner rather than later, and sentiment will likely remain one of cautiousness ahead of the (Fed meeting) next week," Credit Agricole said.

It added that "it appears likely that, at the very least, the Fed will use the December meeting to lay the groundwork for a January taper".

European Central Bank President Mario Draghi will testify on policy before the EU parliament later Thursday, while eurozone industrial production figures are also due to be released.

The euro has enjoyed strong support since the ECB last week held off any new interest rate cuts despite prolonged low inflation. That followed its surprise cut last month of its central refinancing rate by a quarter-point to counter the threat of deflation.

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