* Market looks to Fed for clarity on next policy moves
* U.S. consumer confidence plunges to record low
* Dollar little changed against major currency basket
(Recasts, updates prices, adds comment, changes byline)
By Steven C. Johnson
NEW YORK, Jan 27 (Reuters) - The dollar was little changed
against a basket of currencies on Tuesday as traders awaited
the end of a Federal Reserve meeting at which the central bank
may announce new efforts to thaw frozen credit markets.
U.S. and European stocks edged up but sentiment remained
fragile, and data showing U.S. consumer confidence at an
all-time low this month kept traders cautious and currencies in
confined ranges.
The Fed, which cut its key interest rate to near zero last
month, concludes its two-day meeting on Wednesday, and analysts
said the market will be on alert for word of any new policy
initiatives, including purchases of U.S. government bonds.
"Rates can't go any lower, and they certainly can't raise
them, so all that's left for the Fed is tell us what their
plans are," said Chuck Butler, president of Everbank World
Markets in St. Louis.
Late in New York, the dollar was nearly unchanged against a
basket of six major currencies at 84.441 <.DXY>. It was down
0.1 percent at 88.91 <JPY=> after earlier dipping to 88.45.
The yen tends to rise when anxious investors spurn
higher-yielding, higher-risk currencies and assets for the
Japanese currency's low but steady returns.
The euro rose 0.1 percent to $1.3178 <EUR=> but was below a
one-week high above $1.33 hit after data showing a surprise
gain in German corporate sentiment. Sterling added 1.3 percent
to $1.4148 <GBP=>, moving further away from last week's 23-year
low near $1.35, as UK banking shares rose.
There were few signs of improvement in the U.S. economy on
Tuesday. Data from industry group The Conference Board showing
U.S. consumer confidence at a record low in January added to
market gloom. Another report showed U.S. home prices fell by a
record 18.2 percent in the year to November. [].
"The economic backdrop is still pretty poor," said Win
Thin, senior currency strategist at Brown Brothers Harriman in
New York, who said the rebound in sterling and the euro from
recent lows was partly technical, with a bit of profit-taking
mixed in.
Lately, the dollar, too, has been lifted by safe-haven
flows, though some analysts expressed doubts about whether this
would continue amid fears of increased U.S. deficit spending
and signs of malaise in the world's biggest economy.
The euro has managed to hold above $1.30 for most of
January, recovering quickly from a brief dip below that level
last week and stopping well short of 2-1/2-year lows near $1.23
hit back in November.
"It could be a head fake, but the euro has held pretty well
and the dollar index is trading around an area where it could
be in for a short-term slide," Butler said.
Currency analysts at UBS, though, say that economic and
policy uncertainty will keep risk aversion high in the medium
term. "We continue to expect the dollar to be supported in the
current environment," they wrote in a note to clients.
Some investors also expect the United States, the first
major economy to fall into recession, to also be the first
among developed countries to start growing again.
Earlier, news that Japan launched a $16.7 billion plan to
buy shares in firms whose future has been threatened by the
financial crisis boosted risk demand [] and lifted
Tokyo's benchmark Nikkei <> index nearly 5 percent.
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by
Leslie Adler)
