Euro range-bound against US dollar

London

THE euro was range-bound against the US dollar on Tuesday as investors awaited for the outcome of the Federal Reserve meeting on Wednesday, while risk-oriented currencies strengthened as hopes for an easing in Sino-US trade tensions buoyed sentiment.

Underpinning risk appetite in markets, there is heightened general optimism that Britain won't crash out of the European Union without a deal and the US Federal Reserve will likely cut interest rates this week for a third time this year.

The US dollar was "just bouncing around in ranges" ahead of Wednesday's Fed announcement, said Adam Cole, chief currency strategist at RBC Capital Markets.

Mr Cole thinks further rate cuts, beyond the one expected on Wednesday, are overpriced.

"Unless the Fed guidance is explicitly that they're close to sanctioning another cut then we think that the market expectation is diminished, then dollar goes up," he said.

The euro was last down 0.1 per cent at US$1.1085, close to falling to a 12-day low. Mr Cole expects the euro to be limited to the US$1.1050-US$1.1100 range.

Against a basket of currencies, the US dollar was up 0.1 per cent at 97.84, having risen to a 12-day high of 97.93 earlier.

The Australian dollar climbed for a third consecutive session against the Swiss franc, reaching a six-week high of 0.6824. The currency pair, widely considered to be a barometer of risk sentiment in the currency markets, has risen by 2.4 per cent so far this month, its biggest monthly rise since April.

Broader moves were modest, though, as caution tempered the mood. The New Zealand and the Canadian dollars edged slightly higher before erasing some of these gains.

US President Donald Trump said on Monday that a trade agreement with China looked to be ahead of schedule, without detailing the timing. Washington also said it was studying whether to extend tariff suspensions due to expire in December.

"Global risks remain but have shown signs of subsiding," Philip Wee, FX strategist at Singapore's DBS Bank said in a note.

The British pound, meanwhile, was flat on the day around US$1.2860 after initial losses were erased when Labour leader Jeremy Corbyn said he would support an election. The UK parliament is due to debate a new election bill on Tuesday.

Prime Minister Boris Johnson is widely expected to win the simple majority needed.

On Monday, Mr Johnson failed to win the 2/3 majority necessary to call an election. The vote took place after the European Union agreed to a three-month flexible Brexit delay. REUTERS