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Dollar Holds Gain Versus Yen Before FOMC Seen Tapering

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(Corrects analyst’s name in ninth paragraph.)

March 18 (Bloomberg) -- The dollar held a gain from yesterday versus the yen before the Federal Reserve starts a two-day meeting at which policy makers are expected to trim asset purchases that tend to debase the greenback.

The yen remained lower against most of its 16 major peers as concern eased that Crimea’s vote to secede from Ukraine would spur turmoil in the region. The European Union and the U.S. imposed sanctions on individuals in Russia and Crimea amid the standoff. The Australian dollar gained briefly after minutes of the Reserve Bank meeting this month reiterated a period of interest-rate stability was likely.

“I expect the Fed to taper asset purchases by another $10 billion,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “There are a lot of investors wanting to buy the dollar on dips.”

The yen traded at 101.64 per dollar as of 6:55 a.m. in London from 101.77 yesterday, when it weakened 0.4 percent. It strengthened 1.9 percent last week versus the greenback, the sharpest gain since the five days ended Jan. 24. Japan’s currency was little changed at 141.60 per euro from yesterday, when it depreciated 0.5 percent. Europe’s 18-nation currency was at $1.3931 from $1.3922 at the New York close.

FOMC Meeting

U.S. policy makers will meet today and tomorrow in the Federal Open Market Committee’s first gathering led by Fed Chair Janet Yellen since she succeeded Ben S. Bernanke last month. The central bank has cut monthly bond purchases to $65 billion this year, from $85 billion in 2013. Yellen last month pledged further “measured” steps to slow the buying if improvement continues.

The Fed will probably scrap its 6.5 percent unemployment rate threshold and switch to qualitative guidance for signaling when it will consider raising the main interest rate, according to 76 percent of 54 economists in a Bloomberg News survey conducted March 14-17. Twenty percent of the analysts polled said the Fed will maintain the threshold it adopted in December 2012, while 6 percent said it will drop such guidance entirely.

Housing starts probably increased 3.4 percent to 910,000 in February from the prior month, the median forecast of economists in a Bloomberg poll showed before a Commerce Department report today. Economists in a separate survey predict building permits increased 1.6 percent to 960,000 last month from a revised 945,000 in January.

Long Dollar

Nomura Holdings Inc., Japan’s biggest brokerage, recommended buying the dollar against the yen between the current level and 101.75.

“The FOMC meeting this week could be a catalyst for USD gains,” Nomura analysts, including Jens Nordvig and Yujiro Goto, wrote in an e-mail yesterday. “We think removal of guidance related to the 6.5 percent unemployment threshold will weaken the Fed’s forward guidance on the margin, which could see some increase in US rates and USD support.”

Russia’s ruble rebounded yesterday from a record low, climbing 0.6 percent to 42.7821 against Bank Rossii’s target basket of dollars and euros by 6 p.m. in Moscow, when the central bank stops its market operation. The nation’s Micex Index of shares rallied 3.7 percent after slumping 7.6 percent last week. The MSCI Asia Pacific Index advanced 0.5 percent today.

EU foreign ministers agreed to freeze assets and impose visa travel bans on 21 Russians and Crimeans, while President Barack Obama’s administration put similar sanctions on seven Russian government officials and four Ukrainians including ousted President Viktor Yanukovych. Putin responded by recognizing Crimea as a sovereign state.

Secession Vote

Crimean lawmakers set in motion measures for the Black Sea peninsula to leave Ukraine and join Russia after a March 16 plebiscite, which EU and U.S. leaders have condemned as illegal. Russia has deployed about 60,000 troops along the Ukrainian border, according to the government in Kiev.

The Aussie traded at 90.65 from 90.87 yesterday after rising as much as 0.3 percent following the release of the Reserve Bank of Australia’s minutes of its March 4 meeting. The currency gained 0.7 percent yesterday, when it advanced against all its major peers.

The central bank said it saw more signs record-low interest rates were boosting growth, and reiterated a period of steady borrowing costs was likely.

“It’s a confirmation of what the RBA’s previously said, that they’re likely to keep rates on hold for a period of time,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. “That’s giving the Aussie underlying support.”

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net

To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Jonathan Annells

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