Dollar slips ahead of Fed's first 2016 meeting

Dollar slips ahead of Fed's first 2016 meeting

Tokyo - The dollar slipped against the yen and most emerging currencies Wednesday as markets focus on the Federal Reserve's first meeting of the year.

The US central bank is not expected to announce any change in monetary policy after the meeting ends later Wednesday, following its historic interest rate raise in December.

But dealers will pore over its post-meeting statement looking for signs that it will back off its signal of four interest rate hikes this year, which would support the dollar.

"If the Fed sounds too dovish a chord, they'll lose the option to raise rates in March," Masato Yanagiya, head of foreign-exchange and money trading at Sumitomo Mitsui Banking, told Bloomberg.

"If the Fed isn't so dovish, it's likely US yields will rise, and the dollar will strengthen." The Bank of Japan wraps up its first policy meeting of the year Friday, after speculation at the start of this week that it is considering more stimulus to counter weakness in the world's number three economy.

In Tokyo, the greenback weakened to 118.09 yen from 118.42 yen Tuesday in New York.

The euro slipped to $1.0864 and 128.30 yen from $1.0868 and 128.70 yen.

Speculation that the Fed may back away from its ambitious rate-hike schedule gave a boost to emerging currencies while a broad regional equities rally also lifted appetite for higher-yielding, riskier, units.

The oil-dependent Malaysian ringgit rose 0.67 per cent after crude rallied Tuesday, while the South Korean won was up 0.2 per cent, Indonesia's rupiah tacked on 0.1 per cent, and the Thai baht also edged up 0.1 per cent.

The Australian dollar climbed 0.3 per cent after a report showing a pick-up in inflation lowered expectations the country's central bank will cut interest rates again soon.

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