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US dollar ticks lower ahead of historic Fed meeting

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The US dollar edged lower on Tuesday as "nervous" markets focus on a Federal Reserve meeting this week where policymakers are expected to decide on a long-awaited interest rate rise.

TOKYO] The US dollar edged lower on Tuesday as "nervous" markets focus on a Federal Reserve meeting this week where policymakers are expected to decide on a long-awaited interest rate rise.

After months of speculation, the US central bank is widely seen as all but certain to give the green light to a small increase in borrowing costs for the first time in nearly a decade - usually a plus for the dollar.

But there is disagreement on how fast subsequent increases will be from the Fed, which wraps up its two-day meeting on Wednesday.

The announcement comes as plunging oil prices and worries about tepid global economic growth have sent investors flocking to safe-haven units including the yen.

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Market voices on:

"Markets are just a little bit nervous going into the Fed meeting," Sam Tuck, a senior currency strategist at ANZ Bank New Zealand, told Bloomberg News.

"If anything, the trend for the dollar going into the Fed is a little bit on the soft side, as generally speaking it's all about justifying the current positioning rather than pushing it further."

In Tokyo, the greenback edged down to 120.95 yen in Asian trade from 120.98 yen Monday in New York, and above 123 yen last week.

The euro rose to US$1.1018 and 133.26 yen from US$1.0992 and 132.99 yen, despite ongoing expectations the European Central Bank will unveil measures to loosen monetary policy in the new year, effectively printing cash.

"The euro and the yen remain well supported in this risk-off environment and as investors take off long US dollar positions ahead of the (Federal Open Market Committee) meeting," Bank of New Zealand currency strategist Jason Wong wrote in a commentary.

In other Tuesday trade, Indonesia's rupiah gained 0.41 per cent against the dollar while the South Korean won rose 0.17 per cent.

However, Malaysia's ringgit continued to be hit by soft crude prices, and fell 0.26 per cent.