http://www.forexfactory.com/news.php?do=news&id=66975
Forex - US dollar steady vs euro, yen ahead of next week's Fed policy meeting
HONG KONG (Thomson Financial) -
The US dollar held steady against the euro and yen in afternoon trade in Asia Friday ahead of the Federal Reserve's policy meeting next week.
'The market is anticipating another Fed rate cut again, but they are divided on the size of the reduction,' said Mark Wan, chief analyst at Hang Seng Investment Services Ltd.
On Tuesday the Fed surprised the market by announcing a deep 75 basis point rate cut, a week before its next scheduled meeting, on Jan 29-30. The rate cut triggered a stock market rally in Asia Wednesday and European shares posted strong gains yesterday.
At 1.00 pm (0500 GMT), the dollar was at 107.15 yen, little changed from 107.18 yen in Sydney this morning. The euro was at 1.4750 dollars, little changed from 1.4756.
The Fed will likely cut its key rate by a quarter of a percentage point, Wan said.
'I don't think they need to cut it by 50 basis points,' he said.
The dollar will likely hit 106 yen and the euro will reach 1.490 dollars at the end of this quarter, said Callum Henderson, head of currency strategy at Standard Chartered Bank.
The European Central Bank (ECB) is unlikely to raise its key rate and is more likely to lower it, despite hawkish comments by top ECB officials, Henderson said.
ECB council member Axel Weber took a dismissive tone on a euro-zone rate cut Thursday, adding weight to ECB president Jean-Claude Trichet's statement Wednesday, which suggested he is sticking with his anti-inflation stance and will not follow the Fed in cutting rates.
'Heading into the second half, they will likely cut rather than hike interest rates,' said Henderson.
The ECB is under pressure to follow its peers in the US, the UK and Canada in lowering borrowing costs to help ease credit and encourage consumers and businessmen to borrow, spend and invest and thus help the global economy avoid a recession.