Traders seek direction from Fed later this week By Deborah Levine & William L. Watts, MarketWatch NEW YORK (MarketWatch) -- The U.S. dollar briefly turned higher versus the euro on Monday and stayed near an eight-month high versus other major currencies as traders watched equities and other markets for signs of investors' appetite for risk, which tends to detract from the dollar's safe-haven appeal. By Deborah Levine & William L. Watts, MarketWatch NEW YORK (MarketWatch) -- The U.S. dollar briefly turned higher versus the euro on Monday and stayed near an eight-month high versus other major currencies as traders watched equities and other markets for signs of investors' appetite for risk, which tends to detract from the dollar's safe-haven appeal. Investors "are going to sift through the prepared text searching for clues as to how confident the committee is that the ongoing recovery is achieving sustainability," said Steven Ricchiuto, chief economist at Mizuho Securities USA. "The more confident the makers of policy are that recovery is becoming well established, the more likely that interest rates will be hiked." Ricchiuto expects the Fed will make further changes to the discount rate, used by banks when borrowing directly from the Fed, in the second quarter, followed by some operations to drain excess reserves from the financial system in the next six months. Raising the key interest rate watched by markets -- the target overnight lending rate between banks -- won't happen until 2011, he said. The dollar touched an eight-month high against major currencies Friday, supported by the Federal Reserve's surprise move to increase its discount rate. See Friday's Currencies report.

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