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FOREX-Dollar edges up, trading cautious ahead of Fed

Published 09/23/2009, 11:11 AM
Updated 09/23/2009, 11:15 AM

* Dollar index edges up, still near 1-year low

* Trading cautious as Fed statement, G20 summit looms

* New Zealand dollar surges on surprise GDP growth

* BoE minutes show no plans to increase asset buying (Updates prices, adds details, comment)

By Steven C. Johnson

NEW YORK, Sept 23 (Reuters) - The dollar firmed slightly but remained near a one-year low against a basket of currencies on Wednesday as investors braced for a Federal Reserve statement expected to keep U.S. interest rates at record lows.

Dealers were on alert, though, for signs that the Fed may curtail some of the programs that over the last year have injected trillions of dollars into the troubled banking system. That kept exchange rate moves somewhat subdued.

"People are watching for tweaks to their current programs, which would be market-moving, but I don't think they want to rattle the markets right now," said Jacob Oubina, senior currency strategist at Forex.com in Bedminster, New Jersey.

Traders were also keeping an eye on a Group of 20 nations summit, which begins on Thursday and is expected to call on countries to maintain economic stimulus plans, a move that could boost riskier assets.

The dollar index, which measures the dollar's value against a basket of six other major currencies, was marginally higher at 76.239, off an earlier low of 75.892, a level not seen since last September.

The dollar has shed 2.5 percent this month, though market strategists warned that any hints from the Fed about exit strategies could squeeze large short-dollar positions.

The euro pulled back a bit from a one-year high above $1.48 as U.S. stocks turned negative and was down 0.2 percent at $1.4761. Sterling rose 0.3 percent to $1.6407 and the dollar rose 0.3 percent to 91.40 yen.

News from other central banks showed policymakers are at least thinking about exit strategies, even if they're not ready to implement them.

Minutes from the Bank of England's last meeting showed officials did not press to increase asset purchases, while the dollar shed 1 percent against the Norwegian crown after the Norges Bank left rates unchanged but said it had considered raising them.

The New Zealand dollar hit a 13-month high after data showed the economy exited a recession in the second quarter, sooner than expected. It was last up 0.5 percent at $0.7214.

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