NEWYORK, Mar. 16 -- The euro may fall a second day versus the U.S. dollar after European finance ministers sparred over assistance for Greece.
The U.S. dollar was poised to gain for a second day against the pound on speculation more Federal Reserve policy makers will dissent at today's meeting from the central bank's commitment to maintain interest rates near zero for an "extended period." Australia's dollar fell a second day versus the yen on prospects the minutes of its central bank's March meeting will signal a slower pace to future increases after the bank raised borrowing costs to 4 percent at the gathering.
"The market is priced for slow, grinding assistance to Greece," said Michael Katz, a currency strategist at Forecast Ltd. in Sydney. The Fed's " 'extended period' language will be more vigorously debated, which could be dollar supportive and be seen as a step closer to them actually changing the language."
The euro traded at $1.3674 as of 8:07 a.m. in Tokyo, from $1.3677 yesterday in New York. It declined 0.1 percent to 123.67 yen. The dollar slipped to 90.45 yen from 90.53. Australia's currency fell 0.2 percent to 82.60 yen.
The Federal Reserve will announce its interest-rate decision today, with all 90 economists surveyed by Bloomberg News forecasting policy makers will keep the benchmark interest rate at a record-low range of zero to 0.25 percent.
Since March 2009, the FOMC has said "exceptionally low" rates are likely warranted for "an extended period."
FOMC Reservations
Kansas City Fed President Thomas Hoenig voted against repeating the statement on Jan. 27 because he wanted to keep "the broadest options possible." Since then, Dallas Fed President Richard Fisher, James Bullard of St. Louis and the Philadelphia Fed's Charles Plosser have also expressed reservations.
The euro dropped yesterday against 12 of the 16 most-traded currencies as officials from the 16 countries using it damped speculation a meeting this week will produce a rescue strategy amid hopes Greece's budget cuts will make a bailout unnecessary.
The European currency has fallen 4.5 percent this year against the dollar amid concern Greece's rising debt-servicing costs will keep it from narrowing a budget deficit that is more than four times the European Union's 3 percent limit.
'Out of Steam'
"There's less cohesion in terms of bailout for Greece, and that's undermining confidence in the euro," said Brian Dolan, chief currency strategist at Forex.com, a unit of the online currency-trading firm Gain Capital in Bedminster, New Jersey. "They've downplayed the prospects of a bailout package."
Finance ministers from the euro region didn't decide on specific instruments to aid Greece at a meeting in Brussels yesterday, Luxembourg Prime Minister Jean-Claude Juncker said. A session of all 27 EU finance ministers is scheduled today. On the agenda in addition to Greece are proposals to clamp down on hedge funds and credit default swaps.
Dutch Finance Minister Jan Kees de Jager said earlier that loans and loan guarantees are among the options being discussed for Greece.
"There've been comments supportive for Greece, but it's been more talk than anything else," said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. "As headlines keep coming in saying there's no commitment for aid, that pulls the euro down."
Under Valued Yuan
The Dollar Index, which tracks the currency against those of six major U.S. trading partners, gained for the first time in four days yesterday as investors sought the greenback as a haven after Chinese Premier Wen Jiabao rebuffed calls for the yuan to appreciate. The index rose 0.5 percent to 80.251.
U.S. lawmakers urged Treasury Secretary Timothy F. Geithner to say China manipulates its currency, writing that an undervalued yuan hurts American manufacturers and provides a subsidy to Chinese competitors.
Representatives Timothy Ryan of Ohio and Mike Michaud of Maine, both Democrats, sent a letter signed by 130 lawmakers to Geithner and Commerce Secretary Gary Locke yesterday, demanding the Obama administration take actions including higher tariffs on Chinese-made imports.
