(Updates prices, adds comment, U.S. data, changes byline,
dateline; previous LONDON)
* Fed rate rise on Wednesday more than 90 pct priced-in
* Focus on Dutch vote, euro higher
* Sterling steadies after weak UK wages
By Gertrude Chavez-Dreyfuss
NEW YORK, March 15 The dollar edged lower on
Wednesday, as investors awaited a widely-expected interest rate
increase from the Federal Reserve, but grew cautious about the
rate outlook this year given lingering uncertainty with the
Trump administration's fiscal policy.
Fed fund futures have factored in a 94 percent
chance of a rate rise on Wednesday. The focus has now shifted to
whether the Fed is set for regular quarterly rate increases.
"There may be disappointment that the 'dot plots' are not
going to rise much higher and therefore the language from the
Fed may be more dovish than what they let on last week," said
Jeremy Cook, head of currency strategy at FX payments company
World First in London.
"There is still so much uncertainty toward fiscal policy in
the United States," he added.
The so-called "dot plot" refers to the Fed's interest rate
projections. Currently, the Fed's "dot plot" calls for three
hikes this year.
In late morning trading, the dollar index slipped 0.1
percent to 101.57
Cook said the market needs to see four members of the
Federal Open Market Committee shift their outlook higher to get
a significant change in the 2017 median "dot plots."
Against the yen, the dollar was flat at 114.74, well
below last week's 115.51 peak, its highest since Jan. 19, as
expectations built for the rate increase.
The dollar drifted higher earlier after data showed a steady
increase in inflation, with the consumer price index posting its
biggest year-on-year gain in February in nearly five years.
In the 12 months through February, the CPI accelerated 2.7
percent, the largest year-on-year growth since March 2012.
The Bank of Japan also began a two-day policy meeting on
Wednesday. It is expected to hold its policy steady and stress
that inflation is nowhere near levels that justify talk of
withdrawing its massive stimulus.
Sterling gained to a week's high of $1.2258,
rebounding from the previous day's eight-week low hit on worries
of a painful and prolonged Brexit. The pound was last up 0.4
percent at $1.2202, although it dipped earlier below $1.22 after
UK data showed wage growth slowed in the three months to
The euro, meanwhile, rose 0.3 percent to $1.0629, as
concern about Wednesday's Dutch parliamentary election was
offset by market speculation the European Central Bank may be
ready to wind down its stimulus program.
The Dutch vote, taking place amid a diplomatic row between
the Netherlands and Turkey, is being closely watched as a test
of populist and anti-immigrant sentiment in Europe, before
national elections in France next month and in Germany in
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Ritvik Carvalho in London; Editing by Chris Reese)