FOREX-Dollar stalls ahead of Fed meeting

(Recasts; updates prices; adds analyst quotes; changes dateline
previous LONDON)
By Kate Duguid
NEW YORK, July 30 (Reuters) - The dollar lacked direction on
Tuesday as traders held off on making big moves ahead of the
Federal Reserve meeting concluding Wednesday, at which
policymakers are expected to cut interest rates for the first
time since the financial crisis by 25 basis points.
The move would be a so-called insurance cut to protect the
U.S. economy from global uncertainties and trade pressures, in
contrast to interest rate cuts by countries facing more imminent
risks. Markets will be watching the Fed's forward guidance for
clarity on whether the committee sees the cut as a one-off or as
the beginning of a rate-cutting cycle.
"The market is on hold waiting for the FOMC meeting
tomorrow. That is expected to be the next driver of price action
at a general level," said Shahab Jalinoos, global head of
foreign exchange strategy at Credit Suisse in New York.
The euro EUR= hovered on Tuesday around the 26-month low
it reached last week of $1.110. Although the Fed is expected to
lower rates, U.S. yields will remain above those in the euro
zone, making the dollar a more attractive investment for
yield-seeking traders.
The pound was the biggest mover in the foreign exchange
market, plunging to a new 28-month low of $1.212 GBP= in Asian
trading on growing concerns that Britain could crash out of the
European Union without a transition agreement on Oct. 31.
Sterling was last down 0.33% at $1.217. It was also weaker
against the euro by 0.37% at 91.54 pence, having earlier touched
a two-year low of 91.88 pence.
"Clearly in the UK, sterling is moving due to local
political developments - most importantly the idea that Prime
Minister Johnson may not want to meet European leaders unless
they change their position, which is a more hard-line stance
than the market would have expected as recently as a week ago,"
said Jalinoos.
The Japanese yen was last up by 0.21% at 108.54 yen per
dollar JPY= after the Bank of Japan on Tuesday maintained its
pledge to keep short-term interest rates at a negative 0.1% via
aggressive bond purchases, as expected.
"The Bank of Japan meeting did not deliver anything
materially new. There was a minor change in the wording of the
statement, but it does appear that Japan is going to wait and
see what materializes from the Fed and ECB before taking
action," said Jalinoos.