NEW YORK: The dollar edged lower against a basket of major currencies on Wednesday as oil declined and investors awaited the Federal Reserve's statement for clues on whether bets on a single U.S. interest rate rise in 2016 are justified.
Fed fund futures are implying markets expect just one rate hike this year, compared with four according to Fed policymakers' guidance. That has put the main focus on what the Fed says at 2 p.m. EST (1900 GMT) after a two-day policy review that started Tuesday.
A more aggressive path of rate increases would boost U.S. short-term rates, which would likely help the dollar against lower-yielding currencies such as the yen or euro.
While the U.S. central bank is almost certain to keep rates unchanged, investors are anticipating its policy statement, particularly given markets' turbulent start to the year.
The dollar index fell 0.26 percent to 99.101, trudging further below a seven-week high of 99.799 set last Thursday.
The euro rose above $1.09 to its highest in six days but quickly returned those gains to be flat at $1.0874.
With markets largely in wait-and-see mode before the Fed, sterling was the biggest mover, falling 0.7 percent against the dollar as fears of a U.K. exit from the euro zone grew.
The Australian dollar hit a three-week high after a measure of domestic inflation came in slightly higher than expected. It rose around 0.5 percent against its U.S. counterpart, while other currencies seen as risky struggled.
"We're getting to the end of the month, and equities are down 6 or 7 percent to start the year; in China those moves happen every day ... and crude oil, there's no bid until there is and it goes up nine percent in a day," said Lane Newman, director of foreign exchange at ING Capital Markets in New York. "So it's a bit of all over the place like a mad woman's breakfast."
The dollar added 0.1 percent versus the yen to 118.53 .
Most markets were choppy, with most Asian bourses
closing up on the day but European stock markets falling alongside oil prices . U.S. stocks fell, pulled down by oil and lackluster results from Apple and Boeing.
Crude futures fell around 1 percent but later recovered to trade flat to higher.
More central bank policy decisions are coming up this week, with the Reserve Bank of New Zealand announcing its decision Thursday, and the Bank of Japan's policy statement due on Friday.
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