The U.S. dollar was barely moving against the euro and the yen in afternoon Asian trade on Thursday ahead of the Federal Reserve meeting next week.

While it is widely anticipated that the Fed will likely keep its key interest rates unchanged when policymakers meet on June 24-25, pausing after seven rate cuts from September to April, investors will be waiting for their statement after the meeting to search for more clues on the direction of borrowing costs in the United States.

“There is no particular incentive to move the currency market until after the Fed meeting,” said Tomoko Fujii, Tokyo-based head of economic strategy at Bank of America. “It will be interesting to watch out for the Fed statement.”

At 1 p.m. (0500 GMT), the dollar was quoted at 107.67 yen from 107.66 yen in Sydney this morning. The euro was trading at $1.5561 from $1.5564.

Fed Chairman Ben Bernanke, who has been reiterating his anti-inflation statements in recent days, will probably “repeat his concerns” about consumer prices in the U.S., said Fujii.

“But the U.S. economy remains fragile, so they won’t raise interest rates soon,” Fujii said. “The economy is not strong enough to withstand a rate hike.”

Fuji said the Fed will start its rate hike cycle most probably in December.

Bank of America has recently changed its outlook on U.S. rates. Before this, the bank was expecting the Fed to lower its rates further in September and ruled out any rate hike until next year.

“We are not forecasting any rate cut anymore. We are forecasting multiple rate hikes starting in December,” Fujii said.

The European Central Bank (ECB) may also lift its benchmark rate in July, its first rate increase in a year, Fujii said. That may cause the dollar to decline to the $1.60 level against the euro and may touch its all-time low of $1.6020 posted in April, Fujii said.

But the dollar may start its sustained recovery against the euro towards the end of the year, as the ECB is expected to keep its rate unchanged while the Fed is about to begin its rate hike cycle.

Later Thursday the market will be waiting for the release of the Philadelphia manufacturing index, which is expected to show that the world’s biggest economy remains weak.

Since it started easing its monetary policy in September, the Fed has slashed its rates by a cumulative 325 basis points to 2 percent, the lowest since December 2004.

The ECB, on the other hand, has kept its rate unchanged at 4 percent, a six-year high, since June of last year.

NAB Capital Markets head of currency strategy John Kyriakopoulos said the dollar is likely to be nearing the bottom of its current trading range.

“While we don’t see the Fed hiking rates aggressively this year, the next move in U.S. official rates is up and this suggests a bottom in the greenback,” said Kyriakopoulos.

John Noonan, a senior foreign exchange analyst at Thomson IFR, said the market continues to trade on central bank expectations and those are unclear and rapidly changing.

“The end result is that major currency pairings remain rangebound even though there are some nasty reversals within those ranges,” said Noonan.

Hong Kong 1 p.m. (0500 GMT)

U.S. dollar

yen 107.67

Swiss franc 1.0336

Euro

U.S. dollar 1.5561

yen 167.56

Swiss franc 1.6096

pound 0.7942

Pound

U.S. dollar 1.9599

yen 210.93

Swiss franc 2.0256

Australian dollar

U.S. dollar 0.9471

pound 0.4830

yen 101.91

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