Dollar Rises Ahead of Fed Policy Meeting

By James Ramage 

        The dollar advanced against the euro and the yen on Tuesday on expectations that the Federal Reserve will soon provide more clarity on the timing of its first increase in U.S. borrowing costs in more than nine years.
        The dollar gained 0.4% against the common currency, backing away from a two-week low it reached Monday, as one euro bought $1.1046. The dollar rose 0.3% versus the yen to Yen123.57, picking itself up from its weakest level against the Japanese currency since July 10.
        Investors await the conclusion to the Federal Open Market Committee's two-day policy meeting on Wednesday afternoon to learn whether the central bank is moving closer to raising short-term interest rates from near zero, where they've been held since December 2008. The dollar strengthened as investors shifted toward an expectation for the Fed to signal that it is preparing to increase rates as early as September, said Joe Manimbo, senior market analyst at Western Union.
        Higher U.S. rates would draw yield-seeking investors to the dollar.
        "The market's long been in wait-and-see mode," Mr. Manimbo said. "It needs a more bullish catalyst to pile back into the dollar, and the Fed could provide that" on Wednesday.
        Many asset managers had packed into bets that the dollar would appreciate on expectations that the Fed would raise interest rates around midyear, which pushed the buck to multiyear highs against other developed-market currencies. Meanwhile, central banks in the eurozone and Japan were easing policy to boost growth and inflation using measures that weakened their respective currencies.
        But slow growth around the start of 2015 and growing uncertainty over the Fed's timing for rates has arrested the dollar's ascent since mid-March. Investors still largely believe the dollar will strengthen this year, particularly as Fed Chairwoman Janet Yellen testified earlier this month on Capitol Hill that the Fed remained on track to raise rates in 2015.
        Write to James Ramage at james.ramage@wsj.com
        (END) Dow Jones Newswires

        July 28, 2015 12:13 ET (16:13 GMT)

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