8 August 2006, 09:30  US dollar rangebound in Tokyo ahead of possible rate hike pause

The US dollar was stuck in narrow ranges against other major currencies in early afternoon deals in Asia ahead of the Federal Reserve's meeting tonight amid growing belief that the US central bank will pause from its two-year tightening campaign, dealers said. "While there is now widespread view that the Fed will decide not to hike rates at tonight's Federal Open Market Committee meeting, investors just want to confirm it before making any fresh moves," Hachijun Bank dealer Noriaki Ichikawa said. Currency trading was largely dull with investors awaiting the statement accompanying the Fed's decision due out early tomorrow morning in Asia. "If the Fed issues a stronger warning on inflation risks, there may be relatively strong short-covering on the dollar. "But if it expresses increased wariness over decelerating economic growth, the dollar will simply resume its downtrend," Ichikawa said. While all eyes are on tonight's FOMC meeting and the accompanying statement, Ichikawa said the dollar/yen's decline in the near term may be limited to the 113-114 zone.

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