Dollar weaker around ¥111.40 in Tokyo before FOMC

Wall Street’s week ahead The Fed Trump at the U.N. and bitcoin

Chair Janet Yellen said the Fed would shed up to $10 billion of debt per month through December.

The widely anticipated move will start to unwind the Fed portfolio it acquired during its bond-buying programmes.

Equities had rallied Monday as investors turned their attention to macro issues, particularly a Federal Reserve policy meeting and Trump's maiden speech to the UN General Assembly.

While initially surging against the US Dollar on Monday the Australian Dollar quickly fell back as markets shifted from concerns over North Korea towards the upcoming rate decision from the Federal Reserve, with some analysts branding it the bank's "biggest meeting of the year".

The central bank did, however, offer a rosier picture of the overall economy, upping its economic growth forecast to 2.4% from 2.2%.

But economists and Fed officials say the storms will not affect the underlying trend in growth, which has been steady at around two percent in recent years, and activity should rebound later in the year due to reconstruction efforts.

The central bank said Hurricanes Harvey, Irma, and Maris were expected to affect United States economy in the near term, while they would not alter the course of the economy in the medium term. That neutral rate dropped to 2.9 percent in the new forecast, down from 3 percent in the Fed's June forecast.

But she acknowledged some uncertainty: "Our understanding of the forces driving inflation isn't ideal", she said.

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It maintained its guidance that one further interest rate hike was likely this year despite inflation coming in weaker than expected - adding timid price growth was being "closely" watched.

"Normally you would expect gold to suffer from a reduction of the balance sheet, as it benefited when it was increased", Capital Economics analyst Simona Gambarini said.

The kiwi didn't move much after dairy product prices rose at the GlobalDairyTrade auction overnight, pushing the GDT price index up 0.9 percent.

"They have never done this before, so we don't know how the markets are going to react", he said. "It's the beginning of the end for these extraordinary measures".

The portfolio includes Treasury and mortgage-backed securities that were acquired during and after the 2007-09 financial crisis in a successful program to prop up the economy.

The Fed has given clear signals it will start to wind down its $4.5 trillion balance sheet, in what would be a symbolic moment for the central bank after nearly a decade of unconventional monetary policy.

"The slight upward pressure [on rates] won't be enough to derail the expansion", he said.



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