FOREX-Dollar edges up as currency markets wait for Fed meeting

* Dollar index rises
* Aussie and Kiwi dollars slip
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

LONDON, March 16 (Reuters) - A cautious tone dominated
currency markets on Tuesday, before the start of the U.S.
Federal Reserve's two-day monetary policy meeting.
The Fed's policymakers are expected to forecast that the
U.S. economy will grow in 2021 at its fastest rate in decades,
with unemployment falling and inflation rising, but are not
considered likely to change their monetary policy. The dollar index held steady overnight then rose as European
markets opened, up 0.1% on the day at 91.946 at 0804 GMT =USD .
"Overall, the economic situation is improving further. What
is decisive for the market is how the central banks react to
this," You-Na Park-Heger, FX and EM analyst at Commerzbank,
wrote in a note to clients.
"The Fed is likely to try once again to dampen expectations
of a reversal in US monetary policy. We will have to wait and
see to what extent it will be able to convince the market
though," she said, adding that euro-dollar is likely to remain
at current levels until the outcome of the meeting is known.
The firmer tone for the dollar came as U.S. Treasury yields
edged up, although they remained below recent peaks.
Investors will pore over whatever the Fed has to say about
the rise in yields, which have gained on bets that economic
growth and inflation could prompt a faster-than-expected
normalisation of monetary policy.
"Anything less than a strong message of the Fed being very
committed to maintaining favourable financial market conditions
will likely see USD advance further," wrote MUFG FX strategists
in a weekly note on Friday.
The euro was at $1.19185, down around 0.1% on the day
EUR=EBS .
It has held below $1.20 since March 5, hurt by expectations
for a slower economic recovery in Europe compared with the UK
and U.S. due to problems rolling out coronavirus vaccines.
Germany, France and Italy said on Monday they would suspend
AstraZeneca (NASDAQ:AZN) COVID-19 shots after several countries reported
possible serious side-effects, but the World Health Organization
said there was no proven link and people should not panic.
The Australian dollar - which is seen as a liquid proxy for
risk - was down 0.4% at 0.77225 versus the stronger U.S. dollar
Britain's pound was down around half a percent at $1.3835
GBP=D3 . Economic growth in the UK will fall by 4% in the first
quarter of 2021 compared with the first quarter of 2020, the
governor of the Bank of England said. Japan's yen was lower against the U.S. dollar, changing
hands at 109.225 JPY=EBS . The Bank of Japan's two-day policy
meeting ends on Friday. The central bank's governor said on
Tuesday that it was important to keep long-term interest rates
"stably low". Germany's ZEW survey is due at 1000 GMT. There will also be
U.S. retail sales data at 12.30 GMT and U.S. industrial
production at 13.15 GMT.
Elsewhere, Bitcoin fell to around $55,899.22, having
dropped from its latest record high of $61,781.83 on Saturday
BTC=BTSP .

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World FX rates https://tmsnrt.rs/2RBWI5E
USD https://tmsnrt.rs/3a0DdOD
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