Dollar dips against euro as traders await Fed meeting

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NEW YORK CITY—The dollar weakened slightly against the euro Friday as traders awaited next week’s Federal Reserve meeting hoping for clearer guidance on stimulus policy.

The euro bought $1.3278 around 2100 GMT, up a touch from $1.3275 at the same time Thursday.

The dollar fell more strongly against the Japanese currency, to 98.20 yen from 99.20 yen Thursday.

The euro fell to 130.48 yen from 131.71 yen.

“The dollar is weaker after recent data misses have led to speculation that the Fed may after all hold off from tapering QE in September,” said Fawad Razaqzada of GFT.

The Fed’s Federal Open Market Committee wraps up a two-day monetary policy meeting Wednesday with a statement that traders hope will give a better sense of when the central bank will begin reeling in quantitative easing (QE), its open-ended program of $85 billion-a-month asset purchases.

“Investors remain squarely focused on the Fed’s meeting on Wednesday in the wake of rumors that a new form of forward guidance is being considered,” said Christopher Vecchio of DailyFX.

The Fed has been using “forward guidance”—a communications tool—to signal that it would aim to keep interest rates lower for an extended time period. That period is currently through 2015.

Jens Nordvig of Nomura Global FX Research said the latest catalyst for the dollar’s weakness had been news reports, especially from The Wall Street Journal, that the Fed may consider “enhancing” its forward guidance for rates next week.

The dollar declined against the Swiss currency, to 0.9284 franc from 0.9293 franc Thursday.

But it firmed against the pound, which fetched $1.5377 compared with $1.5389 the prior day.