Euro up as all eyes focus on the Fed

The US dollar has managed to crawl back a tad against a basket of other currencies, but remains close to a four-month low. Although the greenback is up slightly against the yen it is down against both the Swiss franc and the euro. Investors are now concentrating on the results of a policy meeting at the US Federal Reserve to see if Chairman Ben Bernanke will confirm that asset buying will be coming to a premature end.

More market volatility is likely if the central bank does decide to pull back on quantitative easing, although nobody really has any idea what Mr Bernanke is going to say. The hint that there may be a slowdown in stimulus has made the emerging market currencies particularly jittery.

The dollar was last trading slightly up against the yen at 95.55 yen, but dropped against the euro to $1.3393. The single currency is now trading at its highest level in close to four months.

Pressure remains on the majority of Asian currencies other than the yuan and yen. Last week Indonesia made an unexpected decision to hike interest rates in an effort to ease the pressure. The Australian dollar is also suffering, and has lost 15 per cent against the euro since the beginning of April.

The euro was last trading 0.8 per cent up at A$1.4109.