The U.S. dollar largely preserved recent gains against the euro Tuesday, as traders waited to see whether the U.S. Federal Reserve would raise its key interest rate, reported AP today. The euro bought US$1.2854 in European morning trading, down from US$1.2858 in New York late Monday. The British pound fell to US$1.8943 from US$1.9066 late Monday, ahead of national elections Thursday. The dollar bought 105.11 Japanese yen, up from 105 yen. Japanese markets were closed Tuesday-Thursday for national holidays. At its meeting Tuesday, the U.S. Federal Reserve is widely expected to raise the federal funds rate by one-quarter of a percentage point, to 3 percent. That would be the eighth such increase since June 2004, when the central bank began its campaign to tighten credit. On Wednesday, the European Central Bank holds its monthly meeting to set interest rates for the 12 countries that use the euro. Analysts expect the ECB to leave its key refinancing rate at 2 percent, where it has stood for nearly two years. On Monday, the dollar was unaffected by a report that the U.S. manufacturing sector expanded in April for the 23rd consecutive month, but at a slower pace than in March. The Institute for Supply Management's index measuring manufacturing activity registered 53.3 in April, down from March's 55.2 reading. Analysts had predicted it would slow to 55.0. A reading of 50 or above means the manufacturing sector is expanding, while a figure below 50 represents a contraction.
