Dollar is taking a breather as all eyes turn to Fed meeting

The dollar stabilized in Asian markets on Tuesday, but struggled to move away from its lowest levels in five weeks, as dealers believed that banking pressures would prevent the Federal Reserve from raising interest rates by a large amount, or perhaps not at all, at its meeting this week.

The US currency rose about 0.1% to $1.0712 per euro, and advanced slightly against the Australian and New Zealand dollars. It settled at 131.24 yen, slightly above the five-week low of 130.55.

CME’s Videowatch indicates that markets expect 25 percent of the Federal Reserve to stick to its stance when announcing its monetary policy decision on Wednesday, while 75 percent expect it to raise it by 25 basis points.

Sentiment is fragile as investors grapple with banking stress, which has worsened from weakness in a regional US bank to default in a global bank in a matter of days.

The British pound fell 0.1% to $1.2260. The US dollar index rose 0.06 percent to 103.40.

The International Monetary Fund’s approval of financing for Sri Lanka sent the troubled Sri Lankan rupee up nearly 7 percent against the dollar.