US dollar pulls back against euro ahead of Fed decision on interest rates

US Federal Reserve Board Chair Janet Yellen.
US Federal Reserve Board Chair Janet Yellen. PHOTO: REUTERS

NEW YORK (AFP) - The United States dollar pulled back against the euro on Wednesday (Sept 16) on the eve of a Federal Reserve interest rate decision that could see the first hike in more than nine years.

The greenback was barely lower against the euro at US$1.1285 after gaining two straight days.

Against the yen, the dollar edged up to 120.61.

In both cases though the US currency remained in roughly the same range of the past two weeks, amid intense speculation over whether the Fed will raise the federal funds rate, locked at zero since 2008.

A decision by the Fed is expected early Friday (Sept 18) Singapore time. said the consensus estimate was the rate would be unchanged.

"A slim majority is betting on the Fed to hold off on a rate hike until later this year or early next year, given how overseas weakness has complicated the outlook for the US economy," said Mr Joe Manimbo, senior market analyst at Western Union Business Solutions.

All eyes will be on Fed chairman Janet Yellen's news conference, searching for insight into the direction of monetary policy and the central bank's outlook on the US economy.

Mr David Song, currency analyst at DailyFX, said that even if the Fed holds off, if Yellen keeps a 2015 rate hike on the table, it may boost the appeal of the greenback.

"We may see the dollar regain its footing and trade on a more bullish course in the days ahead should the central bank continue to prepare US households and businesses for higher borrowing costs."