Dollar Mixed, Euro in Play

The US dollar is trading narrowly mixed against most of the major currencies ahead of the FOMC meeting. The euro’s recovery, after disappointing price action late Friday and yesterday, has brought it back to within striking distance of five-week highs set last week. Favorable reception to peripheral European bond auction helped extend the already bid euro gains. Euro strength on the crosses is also a clear theme today, with purchases against the yen helped the dollar find some bids in front of JPY85.25, a three-day low and the lower end of the range seen since intervention.

The euro has now convincingly broke through the GBP0.8400 area, for which there had been a battle in recent days. This allowed sterling to extend yesterday’s losses against the dollar, support in the $1.5480-$1.5500 band may be sufficient to stem the pressure today. The dollar-bloc is consolidating yesterday’s gains and the emerging market currencies are generally firmer.