Dollar dips ahead of Fed
The dollar slipped ahead of the U.S. Federal Reserve's two-day policy meeting that begins later on Tuesday, while the yen gained despite expectations that the Bank of Japan will ease later this week.
The U.S. central bank is widely expected to stand pat on policy, but investors were bracing for any possible signals from the Fed about a tightening later this year.
Fed fund futures on Monday indicated that the market sees nearly no chance of a rate hike this week, but the chances of a December hike rose to 56 percent, up from 48 percent on Friday.
The dollar index, which tracks the greenback against a basket of six major rivals, edged down 0.1 percent to 97.228 (DXY), below the previous session's high of 97.569, its loftiest peak since March.
Overnight, the U.S. Dollar Index fell slightly on Monday, but remained near four-month highs as currency traders awaited the start of the Federal Reserve's two-day July monetary policy meeting for added clarity on the pace of the U.S. central bank's current tightening cycle. On Tuesday in Asia, the index was last quoted at 97.28.
Currency traders appeared hesitant to take any outsized risks in Monday's session ahead of the start of the Federal Open Market Committee's (FOMC) two-day July monetary policy meeting on Tuesday morning. While the FOMC is unlikely to make any adjustments to its benchmark Federal Funds Rate, the U.S. central could provide key hints on the timing of its next interest rate hike.
Since the Fed's historic rate hike last December, the Committee has responded by leaving the Fed Funds Rate steady at a level between 0.25 and 0.50% in each of its first four meetings in 2016. When the Fed approved a 25 basis point rate hike at the end of last year, the FOMC abandoned a seven-year Zero Interest Rate Policy by ratifying their first interest rate hike in nearly a decade.