NEW YORK: The dollar retreated from three-week highs on Wednesday as traders took profits before the Federal Reserve's first expected rate rise of 2018 and focused on whether it will indicate three or four increases are likely this year.
Some analysts doubted whether a faster pace of Fed rate increases could stem the greenback's decline that began last year on improving economic growth outside the United States and the possibility that other major central banks would scale back their monetary stimulus.
The Federal Open Market Committee, the Fed's policy-setting group, will release its statement at 2 p.m. (1800 GMT) along with quarterly economic forecasts. Jerome Powell will give his first news conference as Fed Chairman at 2:30 p.m. (1830 GMT).
"We are not persuaded that there will be enough of a shift in the FOMC's overall consensus for four hikes in total this year to be fully incorporated into the view," ScotiaBank strategists Shaun Osborne and Eric Theoret wrote in a research note, adding they saw a risk of the dollar "trading somewhat lower once the post-FOMC dust has settled, considering that market expectations may be stretched."
At 9:13 a.m. (1313 GMT), the dollar index, which tracks the greenback versus a basket of six currencies, fell 0.334 points or 0.37 percent, to 90.037. It reached a near three-week peak at 90.445 on Monday.
The dollar was last down 0.37 percent, at 106.14 yen.
The euro was last up 0.40 percent, at $1.2289
The Canadian dollar and Mexican peso gained after reports that the White House had dropped a demand related to auto exports in the renegotiation of the North American Free Trade Agreement (NAFTA).
The Canadian dollar rose 0.79 percent, at C$1.2967, its strongest level in four sessions against the greenback. The peso rose 1.25 percent, at 18.53 after touching a one-week high at 18.52 pesos per US dollar.
The Australian dollar rose 0.12 percent, at $0.7690, rebounding from a three-month low of $0.7672 in early trade.
Australia, a big producer of commodities, is among the most vulnerable countries if US President Donald Trump's protectionist policy spurs a reprisal from commodity consumer China.
Sterling rose 0.49 percent, at $1.4067 after data showed U.K. wages grew at their fastest pace for more than two years, supporting bets that the Bank of England would raise interest rates as early as May.
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