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The dollar held firm against major currencies on Wednesday as traders look to whether the U.S. Federal Reserve will indicate faster monetary tightening this year, with the first rate increase of 2018 almost unanimously expected later in the day.
The dollar index stood at 90.39, after having risen to 90.446 on Tuesday, its highest in almost three weeks.
Still, broadly speaking, the index has been in a holding pattern between 90.934 and 89.399 so far this month.
One key focus for the policy-setting Federal Open Market Committee (FOMC) is whether policy makers will forecast four rate hikes this year, instead of the median three hikes seen in December’s quarterly forecast.
Followed by the announcement at 2 p.m. (1800GMT), the new Fed Chair Jerome Powell will hold his first news conference as Fed chief at 2:30 p.m. (1830GMT)
“Markets have taken a very hawkish turn with respect to the FOMC in recent days. One big tell is that 2-year yields and expected rates in fed funds futures markets went up yesterday despite the absence of economic data and a seriously downbeat equity market,” wrote Steven Englander, head of research at Rafiki Capital Management.
The two-year yield jumped to 9 1/2-year high of 2.349 percent on Tuesday.
As the U.S. currency firmed, the euro traded at $1.2247, having fallen 0.78 percent on Tuesday and hitting a near three-week low of $1.2240.
The Swiss franc also hit a two-month low of 0.9570 franc to the dollar.
Against the yen, the dollar stood at 106.53 yen, after Tuesday’s gains of 0.41 percent, though trading was slow due to a public holiday in Tokyo.