The dollar was in a holding pattern on Wednesday as markets waited for fresh guidance from the Federal Reserve, while a fall in dairy prices knocked the New Zealand currency broadly lower. The dollar index stood at 96.743, stuck in familiar territory since drifting off a one-month low of 95.938 set last Friday. The euro was little changed just above $1.1100.
No policy action is expected from the Fed, but the market will be hyper-sensitive to any guidance on when it might deliver its next hike in interest rates.
Any signal that there is more than one hike in store this year will be positive for the greenback. Conversely, anything more dovish could keep the dollar pinned down.
"The FOMC is the main game over the next 24 hours," analysts at ANZ wrote in a note to clients.
"We retain the view that the next rate hike could come as early as June, and it would be reasonable to expect further increases in the second half of 2016. However, this outlook remains data dependent."
A hawkish Fed could hurt stock and commodity prices, in which case safe-haven currencies such as the yen and the Swiss franc could gain on the dollar.
The yen eased slightly in Asia but held on to much of the gains it made after surprisingly weak US retail sales data on Tuesday briefly unsettled the dollar. The dollar fetched 113.14 yen, up 0.2 percent on the day but still down 0.4 percent so far this week.
The euro bought 125.91 yen, after having slipped to as low as 125.10 yen on Tuesday.
The Bank of Japan on Tuesday skipped a chance to expand its massive asset-buying programme even as it offered a bleaker view of the economy. Some traders said that the combination cast a shadow on risk sentiment, which perversely bolstered demand for the safe-haven yen. Speculation is also rising that Prime Minister Shinzo Abe may delay a planned tax hike next year, as he organises a series of meetings with renowned economists who advocate fiscal spending.
On Wednesday US economist Nobel laureate Joseph Stiglitz said he had advised Abe to delay the tax increase and focus more on fiscal spending.
"There's some uncertainty on how the currency market will react to a tax hike delay. But I think there's chance it would be regarded as suggesting the limit of monetary easing and lift the yen," said Minori Uchida, chief currency analyst at the Bank of Tokyo-Mitsubishi UFJ.
Two noteworthy currencies overnight were sterling and the New Zealand dollar. Sterling slipped to $1.4124, near its low last week of $1.4119 and having retreated from Friday's peak of $1.4437, driven by oscillating views on whether Britain would leave the European Union in a June referendum.
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