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The dollar was 0.3 percent from its lowest level in three weeks against the euro before the Federal Open Market Committee releases forecasts today for benchmark U.S. interest rates for the first time.

Demand for the U.S. currency was trimmed before a report projected to show pending home sales fell in December. Europe’s common currency rose to this year’s high against the yen ahead of a report predicted to show German business confidence gained in January. The yen slid toward an almost four-week low against the greenback after Japan posted a 2011 trade deficit of 2.49 trillion yen ($32 billion), its first shortfall in 31 years.

“The FOMC meeting could be negative for the U.S. dollar against other currencies, but positive against the yen,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “If they explicitly say they’re going to leave the Fed funds rate at a record low for a very long time, even though the market already knows that and expects it, it may be positive for risk markets.”

The dollar traded at $1.3027 per euro as of 9:51 a.m. in Tokyo from $1.3036 in New York yesterday when it reached $1.3063, the least since Jan. 4. The greenback rose 0.2 percent to 77.80 yen after yesterday reaching 77.85, the most since Dec. 29. The 17-nation euro rose 0.1 percent to 101.37 yen after earlier reaching 101.52, the strongest since Dec. 28.

Fed Meeting
The Federal Reserve said last week it will offer two charts along with the forecasts for the benchmark rate. The first will use shaded bars to show in which year participants in the FOMC project that the central bank will first raise rates. The second chart will show projections from each participant for the appropriate federal funds rate target at the end of the next three years and the longer run.

The Fed left its target for overnight loans between banks in a range of zero to 0.25 percent last month and reiterated that economic conditions may warrant “exceptionally low” rates “at least” through mid-2013. It is forecast to keep the key rate unchanged today, according to a Bloomberg News survey.

Pending sales of existing homes in the U.S. slid 1 percent in December after climbing 7.3 percent the prior month, the National Association of Realtors is forecast to say today according to a Bloomberg survey of economists.

Japan Exports
The yen fell against the euro after a report showed Japan’s exports declined for the third consecutive month in December, capping its first annual trade deficit since 1980. The figures underscore the toll slower global growth and March’s earthquake have taken on the economy.

Shipments dropped 8 percent in December from a year earlier, the Ministry of Finance said today. The median estimate of 27 economists surveyed by Bloomberg was for a 7.4 percent decline.

“If concerns over Japan’s fiscal deficit continue to rise, or if we see Japan’s sovereign rating being cut, yen will get sold at least in the short term,” said Takuya Kawabata, a Tokyo-based researcher at Gaitame.com Research Insitute Ltd., a unit of Japan’s largest currency margin company.

Euro buying was also supported before a report that will probably show German business confidence rose to a five-month high this month as Europe’s largest economy showed signs of avoiding a recession.

The Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 107.6 from 107.2 in December, according to the median forecast of 42 economists in a Bloomberg News survey. That would be the highest since August and the third-straight increase.

The dollar has depreciated 0.9 percent in the past week against nine developed-nation counterparts, according to Bloomberg Correlation-Weighted Currency Indexes. The yen has fallen 2.3 percent while the euro has gained 0.6 percent.