Dollar steps back, markets wary before Fed after weak data and earnings

The dollar stepped back from an 11-year peak against a basket of currencies after soft spending data and disappointing earnings cast doubt on underlying optimism about the U.S. economy, but it found some support against Asian currencies.
Investors took profits from recent gains in the U.S. currency ahead of a Federal Reserve policy announcement later on Wednesday, which some think could show a more dovish bias due to the recent plunge in oil prices.
"I would say the dollar selling we've seen so far is just position adjustments ahead of the major (Fed) event," said Bart Wakabayashi, head of forex at State Street Bank.
"But I am a bit nervous that the dollar may have a further leg to go down if the Fed says something negative (about the U.S. economy), given that the market is still very long in the dollar on the whole," he added.
The dollar index posted its biggest fall since early October on Tuesday to 94.10, slipping further from the 11-year high of 95.481 hit on Friday.
It last stood at 94.30 as the greenback gained a slight boost in Asia after surprise monetary easing by Singapore lifted the U.S. currency against the Singapore dollar and other Asian currencies. [EMRG/FRX]
Against the yen, the U.S. currency fetched 118.15 yen, about 0.3 percent above late U.S. levels but still off last week's high of 118.80.
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