LONDON, Sept 24: The dollar was confined to a narrow range against the euro on Tuesday as investors awaited the outcome of the US Federal Reserve’s interest rate deliberations amid ongoing turmoil in global stock markets.

The single European currency slipped back to $0.9768 from 0.9782 late on Monday in New York.

The dollar eased to 123.32 yen from 123.99 on Monday.

Analysts said the market was awaiting the Fed’s interest rate decision, which was due at around 1815 GMT.

Commerzbank analyst Kamal Sharma, like the vast majority of economists, was predicting that the central bank would leave its benchmark interest rate on hold at 1.75 per cent.

Recent comments from FOMC (Federal Open Market Committee) members have indicated that whilst downside risks to the economy remain, the role of the Fed is not to smooth out each bump on the road back to strong growth, Sharma said.

However, he said that with consumer confidence waning, there was a chance rates would need to be lowered again later in the year, which could weigh on the dollar.

The economist said developments in the US labour market would be key to determining the direction of US interest rates and the dollar.

ABN Amro economist Rob Hayward said recent bellicose comments from US officials, which have boosted speculation that the White House was prepared to launch a unilateral strike on Iraq, was a further factor likely to weigh on the dollar in the near term.

Today it looks more likely the United States will go it alone and that’s less positive for the dollar, Hayward said.

Nonetheless, the analyst said that with European economic growth turning lower, as highlighted by figures on French household consumption released earlier, it was far from clear the euro could maintain upward momentum.

French national statistics institute INSEE said earlier that French consumer spending on manufactured goods declined 0.1 per cent in August from July, although that left it 2.6 per cent up on a year earlier.

The dollar was off highs against the yen.

Finance Minister Masajuro Shiokawa said earlier that dollar-yen levels should stabilise after his ministry instructed the Bank of Japan (BoJ) to buy dollars Monday after the US currency fell to around 121 yen, raising fears the nation’s export recovery would be threatened.

The euro was changing hands at $0.9768 against 0.9782 late on Monday in New York, 120.41 yen from 121.29, 0.6296 pounds (0.6305) and 1.4646 Swiss francs (1.4645).

The dollar was being quoted at 123.32 yen (123.99) and 1.4993 Swiss francs (1.4971).

The pound was at 1.5513 dollars (1.5512), 191.31 yen (192.36) and 2.3268 Swiss francs (2.3223).

On the London bullion market, the price of an ounce of gold edged up to $323.25 from 323.05 late on Monday. —AFP