The U.S. dollar rose across the board Tuesday as investors scaled back expectations the Federal Reserve would announce further aggressive easing measures to prop up a softening U.S. economic recovery. Speculation had been growing that the U.S. central bank would signal a need for more stimulus or the restart of asset purchases at the end of its meeting Tuesday after recent weak data fueled worries about growth. But investors began to reassess their expectations overnight. Some see the Fed taking minor steps such as reinvesting funds to maintain its balance sheet, but not going back to full-fledged quantitative easing, while others say it will adopt a wait and see attitude until at least next month. "We don't think that the Fed will alter the language in its FOMC statement or announce any restarting of quantitative easing," said Amelia Bourdeau, a currency strategist at UBS AG in Stamford, Connecticut. "Dollar shorts are being covered so we're seeing some dollar strength." In early New York trading, the euro fell [EUR=X 1.3098 -0.0125 (-0.95%) ], retreating from a three-month peak of $1.3334 hit Friday on electronic trading platform EBS. The euro's decline accelerated after falling below trendline support on hourly charts near $1.3200, with stop-loss orders also adding to the drop. Support was seen at $1.3125, the 38.2 percent Fibonacci retracement of its November 2009-June 2010 fall. The dollar index [DXC1 81.53 0.741 (+0.92%) ] rose, rising above its 200-day moving average around 80.835 Tuesday and indicating a decreased selling signal. Dollar weakness late last week had pushed it below that key level. Steps by the Fed could consist of a pledge to consider more quantitative easing, reinvesting money from maturing debt into Treasuries or mortgage-based securities, cutting interest paid on excess reserves, and buying financial assets outright. Its decision is due around 2:15 pm New York time. Accommodative monetary conditions are often negative for a currency partly because they can increase its liquidity. Boris Schlossberg, director of currency research at GFT in New York, said the dollar "may see a further relief rally on any news" that further quantitative easing is off the table for now. Yen Edges Up Against the yen, the dollar [JPY=X 86.08 0.12 (+0.14%) ] was up. The dollar had earlier dipped to the day's lows against the yen around 85.65 yen after Bank of Japan Governor Masaaki Shirakawa said no major central bank targets currency levels. He also said the central bank's board spent much time debating the recent rise in the yen and how it could affect business sentiment. The Bank of Japan kept interest rates steady at 0.1 percent and held off on new policy steps, as expected. BTM UFJ analysts said it would be difficult for Japan to justify acting to stem yen strength given that the currency's recent rise versus the dollar had been orderly. It would also be hard to argue the move had been out of line with economic fundamentals, they said. Market players said there were substantial stop-loss orders just under options barriers at 85 yen, with more stops sitting below 84.82 yen. A fall below 84.82 yen would take the dollar to a 15-year low against the yen.

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