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Dollar ticks higher before key Fed decision

Dollar ticks higher before key Fed decision

The dollar ticked higher Wednesday hours before the Federal Reserve is expected to announce a big bond-buying program to support the weak U.S. economy.
The dollar has been under heavy selling pressure in the past two months because of the Fed's expected move. By buying bonds, the Fed would drive down interest rates and trigger more borrowing and spending.
But the prospect of lower interest rates has weighed on the dollar. The U.S. currency has fallen more than 7 percent since late August, when Fed Chairman Ben Bernanke suggested that the Fed would act.
For currency traders, the Fed's expected move overshadowed the midterm elections Tuesday in the U.S., analysts said. Republicans recaptured the House of Representatives, but the Senate remained in Democratic hands. That could provide some minimal support for the dollar because a split Congress is less likely to approve big spending bills, which could worsen the budget deficit, said UBS analyst Chris Walker.
In late morning trading in New York, the euro fell to $1.4005 from $1.4036 late Tuesday, while the dollar jumped to 81.43 Japanese yen from 80.68 yen. The British pound rose to $1.6066 from $1.6024.
The dollar remains near 79.75 yen, its weakest point since World War II, while the euro trades heavily below $1.41. It briefly rose over $1.41 in October for the first time since January.
Markets expect the Fed to announce a program of about $100 billion in monthly bond purchases for five or six months. If the plan is smaller than that, the dollar could get a big boost, setting it on course to reverse some of the steep declines of summer and autumn, said MF Global analyst Jessica Hoversen.
She also noted that recent economic data released in the U.S. has tended to be better than expected, a positive signal for the U.S. currency. On Wednesday, the Institute of Supply Management, a trade association, said the country's service sector grew faster in October than in September. The service sector is the source of the bulk of U.S. jobs.
In other trading Wednesday, the dollar inched up to 1.0101 Canadian dollars from 1.0090 Canadian dollars, and rose to 0.9812 Swiss francs from 0.9794 Swiss francs.