By Michael Kitchen and Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar edged up against the euro on Monday ahead of the release of minutes from the Federal Reserve’s last policy meeting.
The euro EURUSD -0.0047% slipped to $1.3318, compared to its late Monday level of $1.3334.
The dollar index DXY +0.04% , which tracks the unit against a basket of six other currencies, traded at 78.933, down from 78.973 in North American trade late Monday.
The dollar notched gains against the British pound, which is a component of the index.
Sterling GBPUSD -0.2944% slipped to $1.5987, down from $1.6045, as a British Chambers of Commerce report said the U.K. is likely growing but will require more government support for the private sector.
The dollar USDJPY +0.2860% turned up against the Japanese yen notched during Asian hours, to buy 82.33 yen, little changed from ÂĄ82.21 Monday. The greenback fell below the ÂĄ82 level before recovering.
At 2 p.m. Eastern time, the U.S. central bank will release minutes from the Fed’s Open Market Committee meeting on March 13, which analysts read as more upbeat and indicating a lower likelihood of expanding its current bond-purchase program or starting a new one. A third round of so-called quantitative easing devalues a country’s currency because it’s considered akin to printing money.
“There are many participants who continue to look for QE3, but we do not expect much for them to hang their hats on in these minutes,” said currency strategists at Brown Brothers Harriman. “Recall, the FOMC statement recognized some improvement in the labor market and also higher energy prices. Given that the Fed’s leadership thinks that quantitative easing has been successful, they are not about deny themselves such a tool if needed.”
The current bond-purchase program, known as Operation Twist, is scheduled to end in June.
As it enters it’s final months, Brown Brothers analysts said it wouldn’t be surprising to see discussion in the minutes of options, including extending it or sterilizing additional purchases -- which means they’d buy more Treasury or mortgage-related bonds but effectively tie up that money by borrowing it back for short periods at low rates using reverse repurchase agreements.
Currency traders are also watching Spain, which released a few more details about its budget plan.
“If there is any fiscal slippage, then Spain may need to increase its borrowing plans even more, hence Spanish bond yields are rising this morning and are close to the top of their recent range at 5.5%,” said Kathleen Brooks, research director at Forex.com. “This suggests that the market still harbors fears about Spain’s prospects of meeting tough austerity targets for 2012.”
Spain’s 10-year yields ES:10YR_ESP +0.99% lately rose to 5.39% from 5.32% on Monday.
On Monday, a positive Institute of Supply Management’s index on U.S. manufacturing activity encouraged buying in riskier currencies. See more on Monday’s currencies.
