EURAUD Euro vs Australian Dollar

The dollar got off to a weak start Tuesday, but has since pared its losses against its major rivals. The currency is now little changed overall on the day, as investors turn cautious ahead of tomorrow's policy decision from the Federal Reserve.

The Fed is widely expected to raise interest rates by a quarter point Wednesday afternoon. Traders are likely to closely scrutinize the central bank's accompanying statement and forecasts for clues about future rate hikes.

With a spike in new construction of multi-family homes more than offsetting a continued decrease in new construction of single-family homes, the Commerce Department released a report on Tuesday showing a substantial increase in U.S. housing starts in the month of November.

The Commerce Department said housing starts jumped by 3.2 percent to an annual rate of 1.256 million in November from the revised October estimate of 1.217 million. Economists had expected housing starts to edge down to a rate of 1.225 million from the 1.228 million originally reported for the previous month.

The report also said building permits surged up by 5.0 percent to an annual rate of 1.328 million in November from the revised October rate of 1.265 million. Building permits, an indicator of future housing demand, had been expected to dip to a rate of 1.259 million from the 1.263 million originally reported for October.

The dollar dropped to a low of $1.1402 against the Euro Tuesday, but has since rebounded to around $1.1350.

Germany's business confidence eased for a fourth straight month in December to its lowest level in two years, as businesses were increasingly worried about the political developments in Europe and a slowing global growth, suggesting that the biggest economy in the euro area may slide into a technical recession.

The Ifo Business Climate Index dropped to 101 from 102 in November, the Munich-based Ifo Institute said Tuesday. Economists had expected a score of 101.7.

The buck fell to a low of $1.2705 against the pound sterling Tuesday, but has since bounced back to around $1.2625.

The greenback dropped to a 1-week low of Y112.248 against the Japanese Yen Tuesday, but has since rebounded to around Y112.575.

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