Dollar Uncertain As Focus Turns To Federal Reserve

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The dollar gave back its early gains versus the the euro and failed to sustain any direction versus other major currencies on Tuesday as traders braced for tomorrow's statement on monetary policy by the Federal Reserve.

With the US economy picking up steam over the summer, observers will be looking for changes in the Fed's language on keeping interest rates near zero for an extended period.

However, concerns about the snuffing out expansion and prolonging the dismal jobs situation will likely prevent the Fed from expressing too much optimism about the economy or hinting at coming rate hikes.

The dollar rose to a 4-week high of 1.4623 versus the euro overnight, but lost a penny to 1.4720 by mid-day. Eight days ago, the dollar slipped to a yearly low of 1.5059, but has since shown signs of life.

The buck also tailed off versus the sterling, slipping back to 1.6400 after hitting as high as 1.6260. The pair has bounced back and forth between 1.5700 and 1.6700 for the last few months.

Meanwhile, the dollar was steady versus its Australian counterpart even after the RBA raised its interest rate for the second straight month. The dollar rose to .8920 versus the aussie, but leveled off to .9010 from there.

In October, Australia became the first G-20 member nation to hike its benchmark interest rate since the onset of the financial crisis in late 2008.

The dollar was range-bound near the 90 mark versus the yen, as traders were torn over which low-yielder to carry.

Most of dollar's gains came before Warren Buffett made an all-in wager on the country's economic future Tuesday morning, agreeing to a $26 billion buyout of the Burlington Northern Santa Fe railroad.

Buffett's Berkshire Hathaway snapped up remaining shares of one of the biggest US railroads for $100 per share in cash and stock. The move may have inspired risk appetite in traders, propping up the euro and high-yielders.

(Market News Provided by RTTNews)