The dollar held near a four-week high against the yen on Tuesday as the Federal Reserve was poised to raise interest rates for a 14th straight time and investors awaited hints on the monetary tightening outlook. The euro and the Swiss franc got a slight lift after all five permanent members of the U.N. Security Council agreed that the U.N.'s atomic energy watchdog should report Iran to the council over Tehran's nuclear program.
But currencies were confined to narrow ranges before the Fed policy meeting, with traders reluctant to take fresh positions before the central bank issues its statement after the gathering, Alan Greenspan's last at the helm after 18 years. "There is a huge focus on the meeting," said Kikuko Takeda, currency analyst at Bank of Tokyo-Mitsubishi UFJ. "But the outcome ... may not be so surprising."
With data suggesting the U.S. economy has been humming along since the Fed's last meeting in December, the central bank will give itself room to raise rates again at the March meeting by keeping the statement's wording roughly the same, Takeda said. The Fed, which is widely expected to boost its funds rate to 4.5 percent from 4.25 percent, is due to start its meeting at 1400 GMT and issue its statement at 1915 GMT.
The dollar has rebounded in the past week partly on growing expectations that its interest rate advantage could keep widening, which powered the U.S. currency's 15 percent rally against the euro and yen last year.
Futures on the fed funds rate reflect a roughly 80 percent chance of another increase in March. At 0545 GMT, the dollar was buying 117.60 yen , little changed from the level in late New York trade and near a four-week high of 117.81 yen hit on Monday. The euro was also flat at $1.2090.