* Dollar index supported with U.S. yields near 3-month highs
* Wait-and-see mood before Fed meeting limits movements
* Comments from ECB officials temper euro
(Updates prices, adds details and quotes)
By Shinichi Saoshiro
TOKYO, March 14 The dollar inched up against a
basket of currencies on Tuesday as U.S. Treasury yields extended
their rise ahead of an expected interest rate rise by the
The euro pulled back from one-month highs after
dovish-sounding comments from European Central Bank officials
tempered its recent surge.
With a rate increase already seen as a done deal, investor
focus was on what kind of a message the Fed would deliver after
its two-day meeting starting later on Tuesday.
"The latest rise in Treasury yields is underpinning the
dollar, but it is a wait-and-see mood that is mostly prevailing
in the market ahead of the Fed's decision," said Shin Kadota,
senior currency strategist at Barclays in Tokyo.
"Expectations for a hawkish dot plot was a factor that has
pushed up the dollar recently, with hopes for the number of
times the Fed could hike rates this year having increased to
four from three."
The "dot plot" is policymakers' rate projections and
provides a view into their interest rate outlook.
The dollar index against a group of major currencies
was up 0.1 percent at 101.410, adding to modest gains made the
The U.S. currency was steady at 114.850 yen, having
gone to 115.510 on Friday, its highest since Jan. 19.
The euro was effectively flat at $1.0651.
The common currency had climbed to a one-month high of
$1.0714 on Monday, boosted after some members of the ECB's
Governing Council discussed the possibility of higher interest
rates at last week's policy meeting.
But its rise was tempered later on Monday after ECB
Governing Council member Jan Smets reportedly said last week's
policy meeting was not a signal of coming policy change. Bank of
France Governor Francois Villeroy de Galhau also said rising
inflation in the euro zone was highly exaggerated.
Caution ahead of upcoming elections in Holland also capped
the euro. The Dutch will vote on Wednesday in an election that
was seen as a test of anti-immigrant sentiment.
"The market faces a series of event-related risks. It's hard
to predict whether that would be the Dutch elections, the Fed
policy decision, (U.S. President Donald Trump's) budget proposal
or the G20 meeting, but the dollar faces significant downside
risks," said Masashi Murata, senior strategist at Brown Brothers
Harriman in Tokyo.
Murata added that recent expectations for four U.S. rate
increases this year looked excessive, and that the Fed meeting
could help cool exaggerated policy tightening expectations.
The Trump administration's fiscal 2018 federal budget plan
will be released on Thursday, and G20 finance ministers and
central bankers meet in Germany on Friday.
Sterling was a touch lower at $1.2200, its rise
overnight stalling after parliament passed a legislation giving
British Prime Minister Theresa May the power to begin the EU
exit process. May has now cleared the final hurdle standing
between her and the start of the divorce talks.
The pound had gained 0.4 percent overnight after Scotland's
First Minister Nicola Sturgeon demanded a fresh Scottish
independence referendum but said it should take place at the
earliest in late 2018.
The Australian dollar was down 0.15 percent at $0.7561
, giving back some of the previous day's gains made when
the dollar stumbled against the euro.
The 10-year U.S. Treasury note yield was at
2.616 percent after rising overnight to 2.628 percent, its
highest since mid-December.
(Editing by Randy Fabi and Jacqueline Wong)