By Steve Goldstein & Myra P. Saefong, MarketWatch
LONDON (MarketWatch) -- The euro was beaten up Tuesday as traders left the shared currency on concerns over European banks as well as hopes for the greenback's potential ahead of a monetary policy decision by the U.S. Federal Reserve.
The euro changed hands at $1.4547, down from $1.4653.
The dollar index (DXY 76.92, +0.59, +0.77%) , which tracks the greenback against a trade-weighted basket of six major counterparts, was at 77.315, up from 76.351 late Monday.
The dollar changed hands at 89.35 yen, up 0.8% on the session.
The euro was under pressure amid worries about the health of Austria's institutions.
Oesterreichische Volksbanken AG, Austria's fourth largest financial institution, has been put on a watch list by the country's central bank and its financial market regulatory agency, the Austrian newspaper Die Presse reported on its Web site.
On Monday, the Austrian government agreed to nationalize distressed lender Hypo Group Alpe Adria, a bank seen as systemically important in Southeastern Europe.
The Austrian news added to worries over Greek's debt situation. Late Monday, Prime Minister George Papandreou delivered a speech pledging to bring down the country's deficit from 12.7% of GDP to 3% in 2013.
"Just a day after the market digested the news that Dubai World has escaped imminent default and hours after the Greek government announced initial measures aimed at restoring confidence in its budget the market was hit by more bad news," said Jane Foley, research director at Forex.com.
The euro-zone worries come after Wells Fargo became the last of the major U.S. banks to announce plans to repay the government's assistance.
Analysts at the Royal Bank of Scotland said there's a "mega swing" in relative growth projections for the U.S. and the euro zone.
"The earlier market judgment that U.S. growth temporarily achieved at the expense of long-term fiscal prudence cannot be dollar positive, [and] has been at least temporarily suspended for two reasons[:] a) the gap in fourth-quarter U.S. vs. euro-zone growth is so large, especially in the context of a euro-area recession that was much deeper than the U.S.; and b) the market is more open to the idea that just maybe the U.S.'s open spigot policies are succeeding in generating a self sustaining recovery that ultimately will support fiscal accounts as well," they said in a note to clients.
Meanwhile, traders were awaiting news from the two-day Federal Open Market Committee meeting ending on Wednesday. See story previewing Fed meeting.
Tuesday's docket also includes data on the December Empire State manufacturing and the NAHB housing market indices, November producer prices and industrial production, and Treasury inflow data from October.
