FOREX-Dollar slips, lacking direction before Fed meeting

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

(Updates prices, adds comment and detail)
By Elizabeth Howcroft
LONDON, March 16 (Reuters) - The dollar slipped slightly on
Tuesday, but currency markets generally lacked direction as
market participants waited for the U.S. Federal Reserve meeting
to set the tone for markets.
At the Fed's two-day monetary policy meeting, 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, before slipping to 91.807 at 1237 GMT, down by
less than 0.1% =USD .
"Markets are in this flux period where they're gripping on
to marginal bits of information, but there's nothing to define a
new broad dollar trend until we get some more colour from the
Federal Reserve tomorrow," said Simon Harvey, FX analyst at
Monex Europe.
"How the Fed delivers their message tomorrow is going to be
telling for the dollar," he said. “You're going to start getting
the first glimpses of how they interpret an average inflation
target.”
Investors will also 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.
U.S. Treasury yields slipped slightly, below their recent
peaks. U.S. retail sales fell more than expected in February but a
rebound is likely as the government disburses another round of
pandemic relief money to mostly lower- and middle-income
households. The euro was at $1.1933, flat 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 the United States 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 0.1% at 0.77465 AUD=D3 . The New Zealand dollar
was also little changed NZD=D3 .
Reserve Bank of Australia minutes said that the recent
increase in commodity prices was unlikely to translate into a
sustained rise in inflation and that members did not agree with
the aggressive market pricing. Britain's pound was down around 0.2% at $1.3866 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. The pound was also being hurt by the European Union
launching legal action against Britain over a change in trading
arrangements that Brussels says breach the Brexit divorce
agreement. Japan's yen was lower against the U.S. dollar, changing
hands at 108.955 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". Elsewhere, Bitcoin fell to $54,764.30, having dropped from
its latest record high of $61,781.83 on Saturday BTC=BTSP .

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