The US dollar was trading easier against other major currencies here, hit by selling from Japanese exporters after the greenback rose sharply overnight as speculation increased that the Fed may hike its key target rate by as much as 50 bps at its policy meeting starting later today, dealers said.
In overnight action, the euro fell to 1.2562 usd, while the greenback rose to 116.67 yen on speculation the US Federal Open Market Committee, may lift its rights more than the 25 bps previously expected, given signs of stubbornly high core consumer price pressure. But exporters here decided to take advantage of the spike to cash in some of their dollar holdings while some other investors chose to take profits from the greenback's recent rates-inspired run-up.
"If the US FOMC offers a 50 basis point rate hike, the decision may give a further short boost to the dollar," Chuo Mitsui Trust and Banking forex dealer Yousuke Hosokawa said "But at the same time, such a decision may create some uncertainty over the sustainability of US consumer spending and the economy, thereby weighing on the strength of the dollar in the longer term," he added.
Investors were also loathe to take fresh positions on the dollar ahead of the release of Japan' nationwide consumer price index data for May, dealers said.
"Depending on the outcome of price data this week and the Tankan (business sentiment) survey next week, expectations for an early end to the Bank of Japan's zero call rate policy may again resurface," Hosokawa said.
Any renewed anticipation for a near term rise in Japanese interest rates would provide support to the yen.