The U.S. dollar traded in narrow ranges against the yen and the euro in afternoon trade in Asia on Tuesday, with investors sidelined ahead of the European Central Bank (ECB) and Bank of England meetings on Thursday. "There is a bit of a caution and there is no incentive to stretch some of these currencies ahead of these meetings," said Thomas Lam, senior treasury economist at United Overseas Bank. "The rhetoric after the ECB meeting could potentially sway the direction of the euro and the dollar." Trading remained thin with Japanese financial markets closed for a second day due to a public holiday. ECB President Jean-Claude Trichet's comments will likely be "inclined towards taming inflation. While there are risks surrounding growth, the emphasis on inflation will likely be more dominant," Lam said. Inflation in the euro area is at its highest level in 16 years, raising concerns from politicians, businessmen and policymakers. The ECB is widely anticipated to maintain its rate at 4 percent, unchanged since June and the highest in six years. On Monday, the ISM non-manufacturing index jumped almost 4 points to 52.0, beating expectations. This followed slightly stronger-than-expected payrolls figures released on Friday showing that the U.S. economy had shed fewer jobs than earlier anticipated. Further supporting the dollar is speculation that the Federal Reserve will keep its key interest rates on hold for a while after seven rate cuts since September. UOB's Lam expects the Fed to stay on hold until March 2009 and to employ other tools such as increasing its lending program to help ease the credit crunch. The Fed earlier announced that it is expanding its lending facility and increasing its swap lines with the ECB and Swiss National Bank. The Fed on April 30 lowered its key rate by 25 basis points, its smallest cut this year, bringing total reductions to 325 basis points since September. "The Fed will probably be on hold for a while but will remain accommodative via other means, such as pumping more money into the financial markets," said Lam.