CURRENCIES: Dollar Firms, Stays Near Lows Ahead Of Fed

The U.S. dollar firmed slightly but stayed near its lowest levels in a year Wednesday, as traders took positions ahead of the Federal Reserve's widely anticipated statement on monetary policy.

The dollar index (DXY), which measures the greenback against a trade-weighted basket of major currencies, rose to 76.177 from 76.070 in late New York trading on Tuesday -- near its annual low of 76.

The Federal Open Market Committee is not expected to announce a change to interest rates, but its policy statement will be examined for any clues as to how the central bank will continue with a program to buy $1.25 trillion worth of mortgage-backed securities.

"The U.S. dollar-positive surprise would be some concrete indication that the timing of monetary tightening was beginning to be discussed," said Steven Englander, head of U.S. foreign exchange strategy at Barclays Capital. "However, this seems premature."

In recent trading, the euro bought $1.4773 compared with $1.4793 on Tuesday.

The dollar bought 91.40 Japanese yen from 91.13 yen on Tuesday.

"Any surprising optimism voiced over growth could undermine the U.S. dollar if risk appetite is supported, but otherwise the dollar is unlikely to gain from this meeting and at best the FOMC will be neutral for the greenback," said analysts at Societe Generale in a note to clients.

The dollar might also be under pressure ahead of the Group of 20 meeting in Pittsburgh on Thursday. The U.S. is unlikely to attempt much to prevent the dollar from weakening as this should help U.S. exports, delivering a much-needed boost as domestic consumption remains weak.

At the G20 meeting, the U.S. is widely expected to make a call for the global economy to be rebalanced via increased spending from countries, such as China, that sport a trade surplus.

"Further support for the domestic side of the Chinese economy will be supportive of the commodity and pro-cyclical currencies, while putting the dollar back under pressure," said currency strategists at BNP Paribas in a note.

Elsewhere, the British pound rose 0.4% against the greenback to $1.6405 after minutes from the Bank of England showed that the monetary policy committee voted 9-0 to leave the size of its 175 billion pound asset-purchase program unchanged and to make no changes in official interest rates at their September meeting.

The minutes showed there was no discussion of a cut in the central bank's deposit rate.

Market speculation ahead of the Sept. 9-10 meeting had risen over the possibility the bank could cut the rate paid on reserves held by commercial banks with the BOE in an effort to force the banks to move the reserves into the broader economy.

In economic news, private-sector output across the 16-nation euro zone grew for the second month in September, but at a slower overall pace, according to the Markit purchasing managers index released Wednesday.

The composite PMI rose to a 16-month high of 50.8 from 50.4 in August, less than forecasts for a rise to 51.0.