Dollar falls ahead of the policy statement of the Fed

The dollar fell against most major rivals Wednesday, with investors appearing to anticipate European officials will craft an agreement to help with debt problems Cyprus, while looking to the U.S. say the Fed will continue its program of bond purchases. 

The dollar fell against most of its major rivals Wednesday, with investors appear to anticipate that European officials will craft an agreement to help with debt problems Cyprus, seeing them for the U.S. say the Fed will continue its program of bond purchases. 

The ICE Dollar Index, which measures the greenback versus a basket of six currencies rivals, traded at 82.674 in recent action, down from 82,893 in late trading Tuesday.WSJ The dollar index, which measures the greenback against a basket of currencies, a little wider, fell to 73.52 from late Tuesday at 73.70.
The euro emerged from four-month lows against the dollar was changing hands at $ 1.2950 against $ 1.2898 late Tuesday after the parliament of Cyprus rejected a bailout plan proposed by the country's international creditors and government. 

The move made plans to shore up the banking sector of the country into chaos. But the ECB said it would continue to provide further liquidity to Cyprus. Domestic banks are closed, while the country's finance minister, said he had "constructive" talks with his Russian counterpart about possible loans and that discussions would continue. 

"With the ECB offer just enough for now and Cypriot banks in a state of suspended animation pending an agreement (which means that the ECB does not have to be tested), markets may return to 'business as usual 'meaning at risk, "said Elsa Lignos, currency strategist at RBC Capital Markets in London."Remains to be seen whether Russia is prepared to provide the total amount of loans (or equity, whether looking to co-finance with the EU) and under what conditions," said Lignos. 

However, Cyprus is a major concern macro, said Chris Weston, chief market strategist at IG Markets. The "twists and turns in this saga will continue subtracting euro sentiment and fed safe-haven asset appreciation," he said. 

Meanwhile, the Federal Open Market Committee's will conclude its monthly policy meeting later Wednesday. Federal Reserve Chairman Ben Bernanke and his colleagues are expected to keep interest rates fixed and keep buying $ 85 billion a month in Treasuries and mortgage-backed securities. But economists said the Fed's economic forecasts may contain the only surprises. 

"The main problem for us is the view of the Fed on the unemployment rate, with the board having a consensus target of just over 7.7% for the whole year," said Weston."If the Board recognizes the strength in the labor market and reduce this goal, this invariably cause strong inflows into the U.S. dollar," he said. 

But Weston did not expect such a move on Wednesday. "While not ruling out a change here, we believe the Fed wants more evidence before trimming its forecasts for say 7%," he said. 

U.S. stocks rose ahead of the Fed's statement, due at 2 pm ET. The S & P 500 rose 0.5% and the Dow Jones Industrial Average gained 55 points to 14,512. 

In other action the currency market, the pound erased an early loss to trade at $ 1.5158 compared with $ 1.5108 late Tuesday. 

Minutes of the meeting of the Bank of England policy March showed a minority of three members called for the expansion of the bank's asset purchase program but also noted concerns about the potential impact of a rapid fall in the pound on the credibility central bank. 

"Additional monetary stimulus may increase that risk. Could also lead to a depreciation of sterling unjustified if misinterpreted as a lack of commitment to the maintenance of low inflation in the medium term," the minutes said. 

"If the FOMC presser today sends a message Bernanke's pessimistic, then the cable can be extended rally and the pair could challenge the $ 1.5200 level as you go up," said Boris Schlossberg, director of currency strategy BK Asset Management in New York. 

The Australian dollar was trading at $ 1.0390, up 0.3%.Against the Japanese yen, the dollar traded at 95.53 yen, up from around 95 yen on Tuesday.