The dollar hit two-month lows against the euro and Swiss franc on Tuesday as investors viewed an expected Federal Reserve interest rate hike later in the session as unlikely to offer support for the US currency.
The dollar's rally has stalled in recent weeks despite upbeat US economic data and expectations that the Fed will continue to raise interest rates as the greenback has already enjoyed a gain of nearly 10 percent since January.
"We won't see big moves today in anticipation of the FOMC statement. The risk is out there that the Fed could be a bit more hawkish... We still expect the Fed to continue its measured interest rate hikes until the end of the year," said David Mann, currency strategist at Standard Chartered.
"But good news is in the price and dollar positives are running out. Friday's trade numbers will be a reminder for US structural imbalances."
Some analysts said oil prices, which hit a record high above $64 a barrel on Tuesday due to Middle East security concerns, weighed on the US currency.
By 1130 GMT, the euro was up slightly on the day at $1.2366 after hitting a two-month high of $1.2416 earlier.
Friday's US trade data is expected to show the deficit - the major driver of the dollar's fall in the three years to 2004 - widening to $57.25 billion in June.
On Tuesday the dollar also hit a two-month low at 1.2544 Swiss francs as the franc benefited from safe-haven flows related to heightened tensions in the Middle East.
Iran resumed work at a uranium conversion plant on Monday, fanning fears it may be seeking nuclear weapons.
The yen was steady at 112.07 per dollar and 138.60 per euro.
The US central bank is widely expected to deliver its 10th straight 25 basis point rate increase, taking its overnight funds rate to 3.5 percent.
Most analysts expect the Fed's post-meeting statement, due around 1815 GMT, to repeat that more measured credit tightening is ahead.
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