LONDON (AFP) - The dollar rose against the euro but fell against the yen on Tuesday as dealers awaited the latest decision on American interest rates from the US Federal Reserve.
In late morning London trading, the European single currency slid to 1.5496 dollars from 1.5580 late on Monday in New York.
Against the Japanese currency, the dollar receded to 108.05 yen from 108.25.
Markets widely expected the US central bank's Federal Open Market Committee to leave its key short-term interest rate at 2.0 percent on Tuesday, given the weakness of the world's biggest economy.
All eyes would be on the statement released alongside the decision for clues on the US monetary policy outlook, traders said.
"The immediate preoccupation for the dollar will be the Fed's rate announcement tonight," said Calyon analyst Daragh Maher.
"With interest rates widely expected to be held unchanged, the focus will fall on the accompanying statement.
"Despite the generally better than expected run of US data lately, we think the Fed will be reluctant to repeat its view from the last statement that the downside risks to growth have diminished, for fear of fostering premature expectations of a future interest rate hike," Maher added.
"Overall, we expect a neutral tone to the statement, consistent with the Fed's keeping rates unchanged over the next few meetings," said Barclays Capital analyst David Woo.
The greenback was also propped up by tumbling oil prices, which sank under 120 dollars per barrel again on Tuesday.
The US currency has fallen heavily against the euro over the past year because investors tend to prefer currencies offering higher yields.
The European Central Bank was forecast to keep eurozone borrowing costs at 4.25 percent on Thursday amid concerns about record inflation coupled with sluggish economic growth in the eurozone.
The Bank of England was also widely predicted to hold its key lending rate at 5.00 percent on Thursday.
The Australian dollar fell sharply after the Reserve Bank of Australia left interest rates unchanged on Tuesday at a 12-year high point of 7.25 percent, but flagged a possible cut to bolster the economy.
Source: http://news.yahoo.com/s/time/20080727/us_time/wouldyoudrive55;_ylt
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