950822

Greenback finishes

slightly higher

NEW YORK: The dollar ended slightly higher after spending much of the session in a narrow range on Monday as traders awaited meetings of U.S. and German central bank policy makers later in the week.

The Federal Open Market Committee meets on Tuesday to consider possible changes to the federal funds rate, now at 5.75 percent, and the discount rate, which stands at 5.25 percent.

Meanwhile, Germany's Bundesbank is scheduled to meet on Thursday and has an opportunity to adjust its discount rate and Lombard emergency lending rate.

The dollar closed in the U.S. at 1.4758/58 marks, up from the opening at 1.4742/47 marks. It was barely higher at 96.77/87 yen from the open at 96.75/85.

While most currency traders see only an outside chance that the central banks will alter rates, they said the prospect of surprise action is keeping the market on hold.

"Right now, (traders) have to be a little reserved just to be prudent because the Fed can always surprise you," said Kevin Harris, international economist at consulting firm MCM Currencywatch. "We'll have to go past the FOMC meeting to the Bundesbank meeting for people to start pushing things."

Any Fed rate cut has the chance to prompt some selling of dollars, particularly if the Bundesbank refrained from cutting rates as well, traders said.

"If the Fed were to cut rates I think you could see the dollar give back a good portion of its recent gains," said Peggy Reed, vice president at Credit Agricole.

The focus on monetary policy this week has shifted attention away from last week's concerted intervention on the dollar by the central banks of the Group of Three nations, the United States, Germany and Japan.

That intervention helped fuel a powerful dollar rally.

Sentiment toward the dollar remains overwhelmingly positive in the aftermath of that intervention, traders said.

"The market has gotten a very clear signal from the central banks that they do indeed want a higher dollar," said Alex Scarsini, director of foreign exchange at Barclays de Zoete Wedd. Because of that, he said, "the market is really in a dollar-buying mode. People will continue to buy dollars on dips regardless of what happens with interest rates."

The dollar showed little immediate reaction after Standard & Poor's Corp said it may cut five Japanese banks' ratings.

Traders said they would continue to monitor the situation.

The dollar stood at 1.2258/63 Swiss francs, up from 1.2205/15 Swiss at the open, and at Canadian $1.3584/89, down from C$1.3590/95.

Sterling closed at $1.5400/10, down from $1.5405/15 at the open, while the Australian dollar stood at $0.7368/73.

At midday, the Morgan Guaranty trade-weighted index stood at 94.2, from 94.3 on Friday.-Reuter