Dollar dips in cautious trade ahead of Fed meeting

The dollar weakened against other major currencies Friday in cautious trade ahead of next week's Federal Reserve monetary policy meeting, expected to mark an end to its massive asset-purchase program.

The market already has largely priced in the Fed's exit from its easy-money quantitative easing program, said David Song of DailyFX.

The US central bank began tapering the QE monthly purchases last December, when they stood at $85 billion, and the amount now is down to $15 billion.

The Federal Open Market Committee, which meets Tuesday and Wednesday, is also expected to stick to its outlook on keeping its benchmark interest rate near zero to mid-2015.

"Caution ahead of policymakers' October 28-29 meeting caused the dollar to settle into a narrow range against its rivals," said Joe Manimbo of Western Union Business Solutions.

The greenback fell to $1.2666 to one euro from $1.2647 late Thursday.

The euro gained support ahead of the results Sunday of the European Central Bank's unprecedented stress tests on some 130 European banks.

Analysts are confident that because banks have been taking action for months now to plug any holes in their balance sheets, there will not be any nasty surprises.

"We expect that the majority of banks will pass the assessment," said credit rating agency Fitch.

Meanwhile the confirmation late Thursday of the first Ebola case in New York City "had limited evident impact in currency markets," said XE Currency Blog.

2100 GMT Friday Thursday

EUR/USD 1.2666 1.2647

EUR/JPY 136.97 136.93

EUR/CHF 1.2062 1.2066

EUR/GBP 0.7873 0.7888

USD/JPY 108.14 108.27

USD/CHF 0.9522 0.9540