U.S. Dollar Appreciates Before Fed Decision

The U.S. dollar drifted higher against its major counterparts in the European session on Tuesday, as U.S. treasury yields rose before the Fed meeting beginning today that is expected to give cues on its monetary policy outlook.

The Fed is widely expected to maintain its ultra-easy monetary policy, but traders will be paying close attention to any changes to the accompanying statement that may signal a shift in the near future.

The Fed had pledged to keep borrowing costs unchanged until the economy reaches full employment and inflation attains 2 percent target.

But analysts caution that improving labor market and rising coronavirus vaccinations may warrant a withdrawal of the stimulus earlier than expected.

The benchmark yield on 10-year note rose 1.581 percent. Yields move inversely to bond prices.

The economic data due out later in the day includes U.S home prices for February and consumer confidence in April.

The greenback spiked up to a 1-week high of 108.43 against the yen from Monday's close of 108.08. If the greenback rises further, it may find resistance around the 111.00 level.

The Bank of Japan maintained its monetary stimulus unchanged, as widely expected, after tweaking its policy at the March meeting.

The board, governed by Haruhiko Kuroda, voted 8-1 to hold the interest rate at -0.1 percent on current accounts that financial institutions maintain at the central bank.

The greenback gained to 0.9172 against the franc, setting a 4-day high. The greenback is likely to find resistance around the 0.94 level.

The greenback climbed to 4-day peaks of 1.2057 against the euro and 1.3859 against the pound, compared to yesterday's closing values of 1.2085 and 1.3896, respectively. The greenback is seen finding resistance around 1.18 against the euro and 1.34 against the pound.

The U.S. currency edged up to 0.7767 against the aussie, 0.7202 against the kiwi and 1.2419 against the loonie, off its early lows of 0.7804, 0.7237 and 1.2389, respectively. On the upside, 0.75, 0.70 and 1.28 are seen as its next possible resistance levels against the aussie, the kiwi and the loonie, respectively.

Looking ahead, Federal Housing finance agency's U.S. house price index and S&P/Case-Shiller home price index for February and consumer confidence index for April will be featured in the New York session.