Dollar Weakens Before Federal Reserve Meeting As Stocks Advance

The dollar fell against the majority of its most-traded counterparts as the Federal Reserve prepared to begin a two-day meeting amid signs the U.S. economy is slowing, and stocks and commodities rose.

The greenback weakened to the lowest level versus the euro in almost a week. The 17-nation currency advanced as European leaders said a Greek default can be avoided and Prime Minister George Papandreou faces a confidence vote at 5 p.m. New York time. Treasuries declined, sending yields up.

“Some of the fears of broader global, economic and financial disruption as a result of a Greek default are priced out a little bit, and market participants are tiptoeing back into risk,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “Bond yields are up, equities are doing relatively well and commodities are generally higher, so that has been weighing on the dollar broadly.”

The dollar depreciated 0.4 percent to $1.4365 per euro at 9:31 a.m. in New York after reaching $1.4388, the weakest since June 15. The U.S. currency slipped 0.1 percent to 80.17 yen, from 80.25 yesterday. The euro was 0.3 percent stronger at 115.14 yen.

“The play leading into the confidence vote has been to buy euros; the yes vote is priced in now,” Gallo said.

All 87 economists in a Bloomberg News survey forecast the Federal Open Market Committee will keep the benchmark interest rate at zero to 0.25 percent, where it’s been since December 2008. Futures on the Chicago Board of Trade show the likelihood the central bank will increase its target rate by March 2012 dropped to 21 percent from 30 percent a month ago.

More