Dollar struggles to make gains ahead of Fed policy meeting

The dollar edged up Tuesday with investors focused on a Federal Reserve policy meeting as expectations for a June interest rate hike fade.

In Tokyo, the greenback inched up to 119.10 yen, from 119.05 yen in New York.

The euro lost some gains that were driven by upbeat remarks from Greek Prime Minister Alexis Tsipras that he was confident tough negotiations with his country’s EU-IMF creditors would result in a deal by early May, said a report by AFP.

Hopes for a deal were also boosted after Athens reshuffled its negotiating team following months of fruitless talks.

The single currency slipped to $1.0877 from $1.0889 and to 129.54 yen from 129.64 yen in US trade.

The Fed’s policy setting committee kicks off a two-day meeting later in the day, but more weak US data have almost put an end to talk of a mid-summer interest rate hike.

Traders want to see if the Fed offers more clues about its timetable for raising rates.

Fresh indicators on Monday showed a barometer of services-sector activity slumped in April for the first time since December, suggesting economic growth remains fragile in the second quarter.

“The US dollar is feeling some pressure as second-tier US data continue in line with the recent trend of undershooting market expectations and with market participants likely keen to reduce risk ahead of the (Fed) policy announcement,” BNP Paribas wrote in a client note.

The dollar was underpinned against the yen as the Bank of Japan is expected to reiterate at its meeting on Thursday that it is committed to continuing its own massive easing campaign, although few expect it to announce an expansion to the programme until later in the year.

The yen hardly moved after Fitch cut its credit rating on Japan by one notch late Monday, saying Tokyo has not done enough to plug a budget gap left by its decision to delay a sales tax rise.

Japan’s retail sales in March fell 9.7 percent from a year ago, official results showed Tuesday, the biggest fall since 1998 and underscoring weakness in the world’s number three economy, the report by AFP added.