The U.S. dollar declined against other major currencies in the European session on Friday, as traders cautiously await the outcome of Federal Reserve's monetary policy decision due next week.
The Federal Open Market Committee meeting, to be held on July 30-31, is expected to keep its monthly bond buying program intact. Investors are seeking more clarity about the Fed's bond buying program as recent data showed improvement in U.S. labor market.
The central bank chairman Ben Bernanke reiterated last week that the Fed's monetary policy will remain accomodative for the foreseeable future. The Fed's tightening of monetary policy is not "preset course," Bernanke told in his semi-annual testimony.
The Reuters/University of Michigan's final report on consumer sentiment index will show an increase of 84.0 in July from prior reading of 83.9.
The greenback extended its fall against the yen, reaching 98.49 for the first time since July 11. On the downside, the greenback may seek support around the 97.7 level.
Core consumer prices in Japan were up 0.4 percent on year in June, the Ministry of Internal Affairs and Communications said today.
Overall inflation was up 0.2 percent on year, also topping expectations for a 0.1 percent increase following the 0.3 percent contraction in the previous month.
The greenback declined to a 5-week low of 0.9269 against the franc, reversing from Thursday's 2-day high of 0.9394. Further bearish extension of the greenback may lead it to find support around the 0.918 level.
The greenback touched 1.3296 against the euro, a level not seen since June 20. If the greenback extends its downtrend, its next possible support is seen around the 1.335 area.
The European Central Bank has room for further policy rate cuts and should consider offering more cheaper loans to banks to help the economy exit recession, the International Monetary Fund said in a report on Thursday.
The report warned that though collective actions taken by the euro area authorities have addressed important tail risks, the recovery remained "elusive" and the economy faced high risk of prolonged stagnation.
The dollar slipped to 1.5415 against the pound, heading towards Thursday's low of 1.5433 in more than 4 weeks. The next support for the greenback may be eyed around the 1.55 level.
The greenback fell to 1.0261 against the loonie, staying closer to more than a 5-week low of 1.0254 reached yesterday. On the downside, 1.02 is seen as the next support level for the greenback. The pair closed Thursday's deals at 1.0278.
