The dollar fell on Tuesday after weaker-than-expected US economic data boosted expectations the Federal Reserve would hold interest rates lower for longer, while US Treasury yields touched five-week highs as traders made room for government debt supply ahead of the central bank's policy statement.
US durable goods orders rebounded less than anticipated in March and a survey of American consumer confidence missed expectations, adding to a slew of weak data on the US economy in the first quarter.
Tuesday's economic data “plays into the idea that the Fed need not be in any rush to raise rates'', said Richard Franulovich, senior currency strategist at Westpac Banking Corporation in New York.
The lack of uncertainty about Wednesday's statement after a two-day meeting of the policy-setting Federal Open Market Committee also led traders on Wall Street to hold stocks near their highest levels of the year.
“I don't think there will be any surprises there,” said Gordon Charlop, a managing director at Rosenblatt Securities in New York, of the Fed meeting.
“Could they throw a curveball at us? Of course that's always a possibility, but that's not their style, and they've been pretty accommodative ... so I don't think traders are overly concerned.”
The Dow Jones industrial average rose 13.08 points, or 0.07 per cent, to 17,990.32, the S&P 500 gained 3.91 points, or 0.19 per cent, to 2,091.7 and the Nasdaq Composite dropped 7.48 points, or 0.15 per cent, to 4,888.31.
Fed funds futures show investors see no chance the US central bank will raise benchmark interest rates above the current rate of 0.25 to 0.5 per cent on Wednesday. Tuesday's unexpectedly weak data cut the likelihood of any rate hike in 2016, analysts said.
“It is pretty much a given that the FOMC won't raise rates at this meeting, and may not raise rates until the end of the year,” said Kevin Giddis, head of fixed income capital markets at Raymond James in Memphis, Tennessee.
Markets see a 23 per cent chance of interest rates rising in June, according to CME Group's FedWatch.
As traders await the Fed's policy statement, due at 2 p.m. EDT (1800 GMT) on Wednesday, sovereign debt supply on both sides of the Atlantic helped lift benchmark US and German yields to or close to five-week highs.
Treasury notes
US benchmark 10-year Treasury notes slipped 11/32 in price to yield 1.941 per cent, the highest since March 23.
The 30-year yield reached its highest since early February at 2.764 per cent.
The US dollar index, which measures the dollar against a basket of six major currencies, fell 0.25 per cent to 94.616.
The weaker dollar and expectations that a persistent global oil glut would ease lifted oil prices, as did a 3-per cent hike in US gasoline and heating oil prices.
Crude oil
Crude oil futures rose 3 per cent with both Brent and US crude approaching five-month highs touched last week.
European bourses edged higher, boosted by a less-bad-than-expected 80 per cent first-quarter profit fall and unchanged dividend from BP, as well as encouraging results from pulp and paper maker UPM.
Emerging markets indexes rose along with Chinese stocks, while Japan's Nikkei was lower on the day.