The dollar held steady versus major currencies in Asia as traders focus on a Federal Reserve statement and Chairman Ben Bernanke's press conference later in the day.
Most participants expect the Fed to keep its key monetary policies on hold, including maintaining low interest rates through 2014. Instead they are focusing on whether the Fed will paint a brighter outlook for the economy and whether the number of members foreseeing an early rate hike will increase from the previous forecast in January.
"The Fed is likely to show a slightly upbeat assessment on the economy, but such a positive view could be watered down if Bernanke takes a vigilant stance," said Kuniyuki Hirai , foreign-exchange trading department manager at Bank of Tokyo-Mitsubishi UFJ . "Bernanke is expected to keep the possibility of a further easing in his back pocket if needed."
Such an outcome would likely lead to the dollar edging up against the yen on the back of the improved outlook for the U.S. economy, Hirai said, pushing up U.S. Treasurys yields.
David Song , currency analyst at DailyFX, is more bullish on the likely U.S. monetary policy stance.
"As the U.S recovery gets on a more sustainable path, we should see the FOMC drop its dovish tone for monetary policy," he said.
At 0450 GMT , the dollar was at Y81.46 from Y81.32 , according to EBS via CQG. But the dollar's advance was blunted by selling orders above Y81.80 from Japanese exporters before next week's holidays in Japan .
With regard to the Bank of Japan's policy-setting meeting on Friday, the financial markets are focusing not only on the size of any increase in asset purchases by the BOJ, but also on any maturity extensions from the current 2 years.
The greenback will likely face a slew of profit-taking if the increase comes at Y5 trillion yen without maturity extensions as such easing has already been priced in by the market, traders said.
"The bar seems to be quite high for the BOJ to do both an increase of asset purchase increase and extensions at the same time" amid the political stalemate over raising consumption tax, said BTMU's Hirai.
If the outcome is modest, the dollar may test a fall to Y80.00 , "but a sustained rally in the yen is unlikely as the BOJ will keep further easing expectations alive," he added.
The euro was at $1.3196 and Y107.49 from $1.3198 and Y107.31 in late New York on Tuesday. The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 79.221 from 79.178.
Interbank Foreign Exchange Rates At 0050 EST / 0450 GMT
Latest Previous %Chg Daily Daily %Chg
2150 GMT High Low 12/31
USD/JPY Japan 81.44-48 81.31-34 +0.17 81.55 81.32 +5.91
EUR/USD Euro 1.3195-98 1.3195-99 0.00 1.3207 1.3192 +1.82
GBP/USD U.K. 1.6136-40 1.6143-47 -0.04 1.6150 1.6138 +3.84
USD/CHF Switzerland 0.9105-10 0.9103-07 +0.03 0.9110 0.9102 -2.83
USD/CAD Canada 0.9875-80 0.9869-74 +0.06 0.9880 0.9868 -3.25
AUD/USD Australia 1.0310-14 1.0313-17 -0.03 1.0339 1.0308 +1.02
NZD/USD New Zealand 0.8115-20 0.8129-34 -0.17 0.8143 0.8110 +4.39
Euro Rate
EUR/JPY Japan 107.45-50 107.29-33 +0.15 107.64 107.30 +7.95
Source: ICAP Plc.
-By Tatsuo Ito , Dow Jones Newswires; +813-6269-2780; tatsuo.ito@dowjones.com
(END) Dow Jones Newswires
04-25-12 0138ET
Copyright (c) 2012 Dow Jones & Company, Inc.
