* Traders buy dollar on dips on diverging monetary policy view
* Dollar recovers against euro after two sessions of losses
* Fed statement still has weakening effect on dollar (Updates to open of U.S. trading, adds comments)
By Sam Forgione
NEW YORK, March 24 (Reuters) – The U.S. dollar rebounded against the euro on Tuesday on persistent bullish sentiment toward the greenback tied to the divergence of monetary policy between the United States and Europe, but the impact of last week’s Federal Reserve statement limited its gains.
The dollar recovered against the euro after two straight sessions of losses on the view that the Fed will still hike interest rates this year, while the European Central Bank continues with its bond-buying stimulus program.
Early in Tuesday’s session, the euro rose above $ 1.10 for the first time since March 18, when the Fed released its latest policy statement.
“The hangover from the Fed meeting certainly seems to be ongoing,” said Dean Popplewell, chief currency strategist at Oanda in Toronto.
Analysts said the dollar will continue to find support as it hits key lows against other currencies.
“Obviously a cold towel has been put on the (long dollar) trade, but the trend is still there” for dollar strength, said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York.
Popplewell said the market could remain volatile as traders and the Fed eye economic data releases in the United States. The dollar sharply pared its earlier losses against the euro after data showing U.S. consumer prices rebounded in February. The dollar later retraced losses before recovering.
The Swiss franc, meanwhile, hit multi-week highs against the dollar and the euro. Popplewell said selling of the British sterling against the franc after weak British inflation data also helped the franc gain against the dollar and euro.
The dollar hit a nearly one-month low against the Swiss franc of 0.95360 franc, while the euro hit a more than six-week low against the franc of 1.0422 franc.
The euro was last down 0.17 percent against the dollar at $ 1.09260. The dollar was down 0.04 percent against the yen at 119.680 after earlier hitting a nearly one-month low against the currency of 119.220 yen.
The dollar index, which measures the greenback against a basket of six major currencies, was last up 0.10 percent at 97.136.
(Reporting by Sam Forgione; Additional reporting by Ahmed Aboulenein in London; Editing by Peter Galloway)
- Currency Exchange