Watch for the Federal Reserve's big decision this week (page 2 of 2)

In the eurozone, German IFO business sentiment index will attract attention.

Range for the week: $ 1.1400 - $1.1900


Japanese Yen

The dollar found support against the yen, as markets remained nervous about selling the dollar following a fresh verbal warning from Japan's top financial diplomat Zembei Mizoguchi.

izoguchi said that the yen was in no position to strengthen in the longer term. He also said the US economy remains strong relative to Europe and Japan. The dollar rose to 117.60 as talks swirled that the Bank of Japan had sold its currency to stop the dollar from trading below 117.00 yen.

Japan has sold yen for dollars in heavy doses a number of times this year to protect its exports, seen as essential for the nations economic recovery.

Midweek, the yen dropped further as Japanese government bond prices fell sharply, stirring fears that banks could run up big losses on their bond holdings that could ultimately hurt their economy. However, active selling by Japanese exporters around the high of 119.00 levels helped the yen recover marginally.

In the coming week, the yen is likely to trade within well-defined ranges with market attention on the Fed meeting.

Range for the week: 116.00 -121.00.


Sterling

The UK pound set a six-week high on the euro while retreating about a cent from recent 4 ½ year high versus the dollar as continued investor demand for attractive UK yields was partly offset by a dollar rise.

Sterling had initially tested a 4-½ year peak versus the dollar as Bank of England's Stephen Nickell played down the impact of the UK government's intended switch in the Bank's inflation target.

Nickell, who is on the Bank of England's monetary policy committee, said a change to the eurozone's Harmonised Index of Consumer Prices (HICP) inflation target would have no effect on monetary policy.

Markets had expected the BoE might adopt easier monetary policy if Britain switched its inflation target to the HICP. Sterling retreated against the greenback on the last trading session as the dollar bounced across the board on the view an expected US interest rate cut would support economic growth.

The market, which has long been focused on interest rate differentials, was waking up to the possibility an easing could be growth and equities boosting and hence dollar supportive.

Britain sees a relatively thin data week. But the outlook for British rates could resurface with Bank of England Governor Eddie George and other rate setters to appear before the treasury select committee on Tuesday.

Range for the week: $ 1.6400 - $ 1.6900.