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FX round-up: Dollar caution ahead of Fed meeting

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Date: Tuesday 29 Apr 2008

LONDON (ShareCast) - The dollar rose modestly against the euro and yen but weakened against sterling as caution set in ahead of the Federal Reserve’s decision on interest rates this week.

Most analysts have pencilled in a 25 basis point cut to boost the slowing economy. The market will be watching keenly for any indication about future rate moves amid increasing concern about inflation.

Lower interest rates are normally bad for currencies as they reduce investor’s returns in the currency, making it less desirable.

The dollar also came under pressure amid surging oil prices and ahead of key economic data later in the week such as Institute of Supply Management purchasing managers data and non-farm payrolls.

Elsewhere sterling rose against the dollar on Monday as traders shrugged off more gloomy house price data. A survey from Hometrack showed house prices fell 0.9% in April year on year compared with a 0.4% annual rise in March.

However UK market sentiment remained strong, analysts said, with risk appetite buoyant.

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