Julie Haviv
Reuters
March 12, 2012

The dollar dropped against the euro and yen on Monday a day before a Federal Reserve policy meeting, but losses will likely be capped given expectations that the central bank will refrain from further policy easing given signs of a recovering jobs market.

The dollar touched a nearly seven-week high against a basket of currencies, but trade was choppy ahead of the Fed and U.S. retail sales data, a key monthly gauge given consumer spending comprises more than two-thirds of the economy.

With the majority of economists expecting the Fed to maintain its policy of keeping rates near zero through 2014 and refrain from mentioning a third round of bond buying, called quantitative easing, the retail sales data has the potential to sway currency sentiment.

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