Dollar sags in London

The dollar fell against most currencies on Wednesday and looked set to stay under pressure on expectations the US Federal Reserve will reaffirm its ultra-loose monetary policy for the coming months. Sterling neared 17-month highs against the greenback after an in-line reading of first quarter UK growth, with investors who had sold the pound on anticipation of a softer figure being forced to buy it back.
But they extended bearish bets against the dollar, keeping the euro near a 16-month high of $1.4715 while the Swiss franc scaled its strongest point on record at 0.8669. Monetary policy will take centre-stage ahead of a rate announcement by the Fed later in the day. The US central bank is widely expected to keep rates near zero and signal that it is in no hurry to scale back its massive support for the economy.
Given that the European Central Bank has started to raise rates, and others like the Australian central bank are in the midst of a tightening cycle, analysts said the Fed's stance will keep the dollar weak as investors choose higher-yielding currencies. The euro was up 0.2 percent at $1.4672. Traders said Asian and Middle East sovereign accounts were looking to buy the euro on every dip. Offers for the euro are said to be around $1.4750, with system stops cited below $1.4620.
Technical analysts say the euro faced immediate resistance around $1.4720, a level hit when it briefly spiked up in late 2008, and $1.4775, the top of a weekly trendline channel drawn from lows hit in February and April. The dollar skidded to a three-year low of 73.493 against a currency basket, down close to 10 percent from its peak in January, and many traders expect the index to eventually reach its all-time low, hit in 2008, of 70.698.
The greenback hovered around 0.8760 Swiss francs, having fallen as low as 0.8669 in Asian trade, while the Australian dollar shot up to a 29-year high of $1.0853. The pound also rose more than a full US cent to $1.6582 after data showed the UK economy expanded 0.5 percent in January-March from the previous quarter. The yen was one of the few currencies against which the dollar managed to gain, rising 1 percent on the day to 82.36 yen. It tripped past some light stops above 82 yen on steady buying from real money accounts and model funds.
The euro also rose more than 1 percent on the day to around 120.70 yen, its highest in nearly two weeks. The yen came under pressure after S&P downgraded its ratings outlook on Japan's sovereign debt. It warned the huge cost of last month's devastating earthquake would hurt already weak public finances unless the government raised taxes.