By Deborah Levine & Steve Goldstein, MarketWatch
NEW YORK (MarketWatch) -- The dollar rose versus the euro and other major currencies Tuesday, as concerns over European banks and stronger than expected U.S. reports lifted the greenback's prospects ahead of a monetary policy decision by the Federal Reserve.
The euro fell to $1.4560, down from $1.4653 in late New York trading on Monday.
The dollar index (DXY 76.82, +0.48, +0.63%) , which tracks the greenback against a trade-weighted basket of six major counterparts, rose to 76.816, compared to 76.351 late Monday.
The dollar changed hands at 89.55 yen, up 0.9% on the session.
A pair of reports in the U.S. showed producer prices and industrial output rose more than anticipated last month, adding to evidence the U.S. economy is recovering from its recession. See more on producer price data.
Meanwhile, traders were awaiting news from the two-day Federal Open Market Committee meeting ending on Wednesday. See story previewing Fed meeting.
Policy makers are expected to keep benchmark interest rates steady and retain the vast majority of the forward-looking portions of its statement. Still, a media report hinted that the Fed may raise the discount rate -- its lending rate directly to banks -- which would be a small, first step away from its ultra-loose monetary policy it put in place since the credit crisis began.
The dollar pared some of its gains in mid-morning trading, after the Treasury Department's Treasury International Capital, or TIC, report showed overseas investors bought a net $43.4 billion in long-term U.S. securities in October, down from $55.7 billion in the prior month.
"The dollar did weaken slightly following the Treasury International Capital flow report," or TIC report, said Kathy Lien, director of currency research at Global Forex Trading, in an email.
Chinese demand was flat in October, while the biggest buyers of U.S. dollars were Brazil, Hong Kong , Ireland and France, she said.
"The trend of investors shifting from short to long term investments represents their greater confidence in the U.S. recovery," she said.
Still to come at 1 p.m. Eastern time is a report on homebuilders' confidence.
Austrian banks
The euro was under pressure amid worries about the health of Austria's financial 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. See more on Wells Fargo.
