(Adds comment, U.S. data, updates prices, changes byline,
dateline; previous LONDON)
* Fed rate hike imminent after two-day policy meeting
* European currencies kept under pressure by political risks
* Focus on what kind of message Fed to deliver
* Sterling hits 8-week low
By Gertrude Chavez-Dreyfuss
NEW YORK, March 14 The dollar rose on Tuesday,
bolstered by an expected interest rate increase by the U.S.
Federal Reserve this week and helped by political risks in
Europe amid Dutch and French elections that have pressured
"Sentiment remains firmly bullish towards the greenback with
further gains expected as speculators bet on the Federal Reserve
raising U.S. interest rates repeatedly this year," said
Britain-based research analyst Lukman Otunuga at online currency
The Fed starts a two-day monetary policy meeting on Tuesday.
Fed funds futures have priced in a 95 percent chance the Fed
will nudge rates higher on Wednesday.
The dollar index, which measures the greenback against a
basket of six major currencies, climbed 0.2 percent to 101.54
Also buoying the dollar's outlook, data showed that U.S.
producer prices rose more than expected in February and the
year-on-year gain was the largest in nearly five years.
In particular, a key gauge of underlying producer price
pressures that excludes food, energy and trade services
increased 0.3 percent in February, the biggest gain since April
2016. The so-called core PPI rose 0.2 percent in January.
The euro, which hit a five-week high on Monday above $1.07
on expectations the European Central Bank is moving
towards winding back its stimulus program, fell 0.2 percent to
$1.0636 on caution ahead of the Dutch vote. That extended falls
from the previous day on comments by ECB officials that were
seen as relatively dovish.
The Netherlands will vote on Wednesday in an election that
is seen as a fresh test of the anti-immigrant, populist politics
that swept across the West in 2016.
Polls suggest the government may lose about half its seats
while the anti-Islam Party for Freedom (PVV) party of Geert
Wilders surges. Though Wilders has little chance of winning
enough seats to form a government, a PVV win would send shock
waves across Europe.
Sterling, meanwhile, slipped 0.5 percent to $1.2151
, after earlier falling to an eight-week low, on worries
about a possible second Scottish independence referendum and the
triggering of Article 50, which will formally begin the
negotiations that will take Britain out of the EU.
Investors also have their eyes on the Trump administration's
fiscal 2018 federal budget plan, which will be released on
Thursday, and a meeting of G20 finance ministers and central
bankers in Germany on Friday.
(Additional reporting by Jemima Kelly in London; Editing by