LONDON, Sept 18: The dollar was little changed against the euro on Tuesday as US Federal Reserve policymakers met in Washington, where they are expected to approve a cut in US interest rates.

In late European trading, the euro gained slightly to $1.3874, from $1.3868 in New York late on Monday.

Elsewhere on Tuesday, the dollar gained to 115.79 yen from 115.10 yen late on Monday as the chances of a Japanese rate hike diminished.

Tuesday’s US interest-rate event “represents the most important Fed meeting and decision since the Fed stopped hiking rates in July 2006,” ABN Amro analyst Dustin Reid said.

The Fed is widely expected to act in the face of the worst housing slump in decades that has led to rising mortgage defaults and a tightening of credit standards that threatens the overall economy, dealers said.

Most investors expect the Fed to trim a quarter point from the federal funds rate, which has been at 5.25 per cent since June 2006, and some are calling for a bolder half-point reduction, citing rising recession risks.

“The majority of the market is convinced the Fed will press on the accelerator, but less sure if the cut will be 25 basis points or 50 basis points in size,” Commonwealth Bank of Australia (CBA) currency strategists noted.

In data out on Tuesday, the producer price index for August, a signal for future inflationary pressures, fell 1.4pc in August —four times faster than the 0.3pc decline expected, and the sharpest fall since October last year.—AFP