* Dollar hovers in narrow ranges as Fed meeting awaited
* Traders wary of hawkish Fed statement
* Australian dollar boosted vs yen on Japanese retail demand
By Chikako Mogi
TOKYO, June 24 (Reuters) - The dollar inched up against the
yen on Tuesday as market players awaited a Federal Reserve
statement that could shed light on the timing of an interest rate
hike.
After last week's selling on renewed concerns about the U.S.
economy, the dollar may be supported as traders adjust positions
before the Fed meeting kicks off later in the day, though the
currency lacks strength beyond such technical buying, said
Hiroshi Yoshida, a trader at Shinkin Central Bank.
"I don't expect big moves today due to caution before the Fed
meeting," he said.
"There is wariness about the risk of a hawkish Fed statement
that could fuel speculation for a rate hike in August, which is
not yet fully priced in the market. At the same time, the dollar
lacks a reason to build on gains."
Some traders cited quarter-end funding needs as a factor
behind the dollar's firmness, exposing the currency to the risk
of a fall once such moves are finished.
"Those short of dollars are scrambling to raise funds by any
means in any currency, particularly ahead of the June quarter
end," said a senior dealer at a Japanese trading firm.
"Dollar short funding is likely to intensify as investors
seek to build a fat buffer as liquidity dries up in the summer,
opening the risk for a sharp dollar drop once the quarterly
funding is complete," he said.
The dollar was up 0.2 percent from late U.S. trading on
Monday at 108.05 yen <JPY=>, off a four-month high of 108.59 yen
hit last week.
The euro was little changed on the day at $1.5522 <EUR=>,
recovering from a drop below $1.55. The euro fell on Monday after
data showed German business sentiment and the euro zone's
manufacturing and service sectors contracted in June, denting
expectations for a rate hike by the European Central Bank.
The euro was underpinned against the dollar by the single
currency's gain versus the yen. The euro inched up 0.2 percent to
167.66 yen <EURJPY=R>, not far away from an all-time high of
169.05 yen struck in July last year.
Against the yen, the Australian dollar hit a seven-month high
around 102.90 yen <AUDJPY=R>, boosted by demand for higher yields
from Japanese retail investors.
Traders said individual investors are buying overseas assets
with higher returns as Japan's summer bonus season kicks off.
EUROPE DATA ON RADAR
European data due later in the day include the French
business climate for June, French consumer spending for May and
the German GfK index of consumer sentiment for July.
Traders said weak readings for these data could push the
single currency lower against the dollar.
The ECB has signaled a quarter-percentage point rate rise to
4.25 percent in July but officials have stressed this would not
necessarily lead to a series of hikes.
The Fed is expected to keep rates at 2 percent on Wednesday
when it concludes a two-day meeting. The futures market has
priced in a pair of rate hikes by year-end due to surging energy
and food price inflation.
Some analysts were sceptical that the Fed's post-meeting
statement would signal a near-term rate hike.
"I doubt if the Fed's statement will highlight more the
inflation risks to suggest a near-term rate increase," said
Masafumi Yamamoto, head of foreign exchange strategy for Japan at
the Royal Bank of Scotland.
"The dollar may face selling once the market recognises
that," he said.
(Additional reporting by Rika Otsuka; Editing by Brent
Kininmont)
