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Dollar edges lower as investors await Fed meeting outcome

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·3-min read
FILE PHOTO: U.S. one dollar banknotes are seen in front of displayed stock graph
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By John McCrank

NEW YORK (Reuters) -The U.S. dollar edged lower against a basket of peer currencies on Tuesday as investors awaited the outcome of this week's two-day Federal Reserve policy meeting for any signals as to when the central bank will begin tapering its asset purchases.

The greenback was 0.263% lower at 92.362 at 2:15 p.m. ET, but still within striking distance of its 3-1/2 month high of 93.19 hit on July 21.

The U.S. currency has risen broadly for more than a month on expectations that as the economic recovery gains steam, the Fed will begin to taper its monetary support to keep inflation in check. But the rise in COVID-19 Delta variant cases may cloud the outlook.

"The dollar has had a nice summer surge and I think the event risk that the Fed poses has been enough for dollar bulls to take some chips off the table," said Joe Manimbo, senior market analyst at Western Union Business Solutions.

The Fed began its two-day meeting on Tuesday, to be followed by a press conference by Chair Jerome Powell on Wednesday.

"I think he's just going to signal to markets that they've been discussing the size of the taper, they're discussing how to taper, but they're still in somewhat of a wait-and-see mode, given where we are in the recovery," said Edward Moya, senior market analyst at OANDA.

"So, they're going to try to punt it, but I think there will be some hawkishness."

Data on Tuesday showed that U.S. consumer confidence hovered at a 17-month high in July, suggesting the economy maintained its strong growth clip at the start of the third quarter.

Separately, the International Monetary Fund upgraded its growth outlook for the United States and other wealthy economies due to ongoing fiscal support and access to COVID-19 vaccines, while at the same time downgrading its estimates for a number of developing economies.

Overall, the IMF maintained its 6% global growth forecast for 2021 in an update to its World Economic Outlook.

The euro edged up 0.26%, changing hands at $1.1833 versus the greenback, while sterling gained 0.55% to $1.38925 as early data seemed to show an ebb in surging COVID-19 cases in Britain in spite of the removal of many social curbs last week. [GBP/]

Elsewhere, concern over the spread of the Delta variant and Hong Kong stock market jitters weighed on risk-oriented currencies.

The Australian dollar weakened 0.26% while the New Zealand dollar was down 0.56%.

The Chinese yuan held up despite turmoil in equities and was up 0.66% at 6.5255. CNY/

In cryptocurrencies, bitcoin was up 1.04% at $37,677.58, but off its Monday high of over $40,000, after Amazon.com said a weekend news report claiming it was preparing to accept crypto payments was false. [nL4N2P23OT]

(Reporting by John McCrank;Editing by Jason Neely, David Holmes and Dan Grebler)

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