Dollar rises as Fed meeting gets under way

NEW YORK (MarketWatch) — The U.S. dollar moved higher versus the euro and the Japanese yen Tuesday, extending a modest gain in the wake of data that showed consumer confidence fell more than expected in July while the Federal Reserve began a two-day monetary-policy meeting.

The ICE dollar index , a gauge of the greenback’s movement against six other major currencies, changed hands at 81.815, up from 81.663 late Monday in North America.

The WSJ Dollar Index , which measures the currency’s moves against a slightly wider basket, rose to 74.11, up from Monday’s 73.91 closing level.

The dollar, however, “may struggle to hold its ground over the next 24 hours of trading as the advance [gross domestic product] report is expected to show the world’s largest economy growing at a slower pace in the second quarter,” said David Song, currency analyst at DailyFX. “At the same time, there’s growing speculation that the [Fed’s policy committee] will shift the forward-guidance in favor of its highly accommodative policy stance, and we may see a sharp selloff in the greenback should the committee reduce the thresholds for unemployment and inflation.”

On the other hand, more central bankers could be prepared to turn more upbeat about prospects for a faster recovery in the second half of the year, and the dollar could benefit if the Fed's policy statement lays out a more detailed exit strategy, Song said.

The euro bought $1.3265, little changed from its level in North American trade late Monday, while the British pound fell to $1.5242 from $1.5349.