The euro held steady against the dollar on Tuesday as investors remained on the sidelines, eager for the Federal Reserve's Wednesday statement on monetary policy, anticipation of which overshadowed lukewarm U.S. wholesale pricing data The Federal Reserve will announce its latest statement on monetary policy this Wednesday, and expectations for the U.S. central bank to cut its monthly bond-buying program to $15 billion from $25 billion kept the greenback firm against the euro and most other currencies in steady trading. Federal Reserve officials have expressed concern about persistent slackness in the U.S. labor market; though some have said rate hikes could come sooner than markets are expecting if the economy continues to improve.
The pound trimmed back losses against the dollar on Tuesday, recovering from session lows, but concerns over the prospect of Scottish independence looked likely to keep volatility in sterling. Sterling remained under pressure as uncertainty over the outcome of Thursday’s referendum on Scottish independence continued to dampen investor demand for the pound. The latest opinion polls on the Scottish referendum have indicated that the outcome of the vote is too close to call. Concerns over the prospect of a yes vote pressured sterling to 14-month lows against the dollar last week after polls indicated that support for the yes vote had edged into the lead for the first time since the start of the pro-independence campaign. Uncertainty over what currency an independent Scotland would use, as well as concerns over how much of the U.K. national debt it would take on have rattled financial markets.
The yen came under pressure last week after Bank of Japan Governor Haruhiko Kuroda said that the bank would be prepared to immediately loosen monetary policy or implement other measures if its 2% inflation target becomes difficult to meet. The dollar was little changed against the other major currencies on Tuesday, still trading near 14-month highs as investors turned their attention to the outcome of the Federal Reserve's two-day policy meeting on Wednesday. Dollar little changed, near 14-month highs vs. rivals. The dollar holds close to 14-month highs with Fed in focus. Demand for the dollar continued to be underpinned by expectations for an early hike in U.S. interest rates.
