* Dollar drifts, little impact from Jeddah oil meeting
* Fed meeting this week seen as potential negative for dollar
* German Ifo data to test expectations for multiple ECB hikes
By Rika Otsuka
TOKYO, June 23 (Reuters) - The dollar was little changed
against the euro and the yen on Monday after world energy powers
were unable to come up with a quick fix to rein in runaway oil
prices at an emergency meeting over the weekend.
Although Saudi Arabia, the host of the meeting, vowed to pump
more oil, traders said the meeting resulted in no remedies that
would reverse the more than $40 surge in crude since the start of
the year to record peaks. []
Underscoring such views, U.S. crude oil futures rose more
than $1 a barrel on Monday due to growing tension between Iran
and Israel. []
Such a rise in oil prices bodes ill for the dollar, said a
trader for a major Japanese trading house.
"The United States is in a dilemma, facing both the risks of
inflation and an economic slowdown, so the moves in oil prices
are likely to make their impact felt," the trader said.
Market players had been eyeing the weekend meeting closely
because the dollar's slide has contributed to the surge in oil
prices and global inflation pressures while also adding to the
U.S. economy's housing-led struggles.
In addition, the dollar has tended to fall when oil prices
surge due to speculation that oil-producing countries may use the
increased dollar-denominated windfall from crude exports to buy
euros and other currencies to diversify their portfolios.
The dollar was steady from late U.S. trading on Friday at
107.35 yen <JPY=>, staying below a four-month high of 108.59 yen
hit last week.
The euro was little changed at $1.5612 <EUR=>, but
underpinned by expectations that the European Central Bank will
raise interest rates by a quarter-percentage point to 4.25
percent in July.
The euro rose 0.1 percent to 167.59 yen <EURJPY=R>, staying
within sight of an 11-month high of 168.13 yen struck on trading
platform EBS on Friday.
EUROPEAN DATA
Activity was subdued in Asian trade as investors braced for a
Federal Reserve meeting this week and European economic data
later in the day that will test expectations for higher interest
rates on both sides of the Atlantic.
Investors will look to euro zone data, including the German
Ifo institute's business climate index and euro area
manufacturing sector purchasing managers index, due later in the
day for clues on whether the European economy is solid enough for
the ECB to boost interest rates beyond July.
The Fed wraps up a two-day policy meeting on Wednesday and is
widely expected to leave rates unchanged at 2 percent, so the
focal point will be the post-meeting statement for clues on
whether the central bank can lift rates later in the year.
The Fed is in a tough spot as central bankers fret about
mounting inflationary pressure even as the economy is suffering
from fallout from the slumping housing market and credit crunch.
U.S. rate futures show that traders see the Fed raising rates
by 50 basis points by year-end. <FEDWATCH>
"Given market expectations for two rate rises before
year-end, there is a greater risk of the dollar falling if the
Fed shows a cautious stance towards rate tightening," said Junya
Tanase, a forex strategist at JPMorgan Chase Bank in Tokyo.
The dollar fell broadly late last week as fears of further
write-downs in the U.S. financial sector raised speculation the
Fed would not signal a shift towards tighter monetary policy this
week.
(Additional reporting by Masayuki Kitano; Editing by Chris
Gallagher)
