Dollar mixed ahead of Fed rate meeting

The dollar was mixed against other major currencies Monday one day ahead of a Federal Reserve meeting at which the US central bank is widely expected to keep its key interest rate unchanged. Analysts said the dollar lost some ground to the euro as a US government report showed that consumer spending moderated in June from the prior month, and as traders betted that US rates would remain below eurozone rates. The single European currency was changing hands at 1.5580 dollars around 2100 GMT, up from 1.5555 late Friday. The dollar gained against the Japanese currency, rising to 108.25 yen from 107.68. Analysts said currency traders were looking further ahead than Tuesday's rate meeting at which the Fed is predicted to keep its federal funds rate firmly pegged at 2.0 percent amid uncertain economic times. "The US dollar has been rallying against the world's most heavily traded currencies on speculation the United States Federal Reserve could open the door for a series of rate hikes in the months ahead," analysts at Forex Capital Markets said in a briefing note. "Indeed, the US dollar is trading close to a one-month high against the euro and has been appreciating sharply against the Japanese yen," they said. Most currency-watchers say the Fed will keep rates unchanged Tuesday as the housing market remains caught in a downturn and as a credit crunch continues to roil the banking industry. The European Central Bank and the Bank of England are also both expected to leave their respective key rates unchanged at meetings set for Thursday. The euro picked up momentum against the dollar in the wake of a report from the US Commerce Department which showed that consumer spending rose 0.6 percent in June from May while incomes rose a mild 0.1 percent, marking the weakest gain in incomes since April 2007. On the inflation front, the PCE (personal consumption expenditures) price index spiked 0.8 percent in June -- its strongest monthly gain since 1997 -- following a gain of 0.5 percent in the prior month. The core PCE rate, which strips out volatile food and energy costs, increased 0.3 percent, its biggest increase since September of last year. Economists said the report would heighten the Fed's debate on inflation risks, but would not trigger any rate moves. The pound meanwhile came under pressure following a weaker-than-expected report on the construction sector and as the British housing market remained mired in a downturn. The pound was quoted at 1.9628 dollars, down from 1.9753 late Friday. In late New York trade, the dollar stood at 1.0476 Swiss francs, down from 1.0497 last week.