Dollar subdued in Europe

The dollar was subdued in European trade on Wednesday, with the Federal Reserve expected to raise US interest rates and investors looking for clues on future Fed monetary policy. Fed fund futures price in a more than 90 percent chance of a rise in rates on Wednesday, and attention is shifting to whether the Fed is now set for regular quarterly rate increases.
"The 25-basis point-hike is fully priced in, so that's not even going to be a factor ... it's more what the Fed's path is going to be going forward," said Societe Generale currency strategist Alvin Tan in London.
"We're thinking the 2017 dots indicating three hikes in total is unlikely to be changed. But there's a good chance that the rate path for 2018 and 2019 could be raised slightly higher, in terms of the median dot path."
Against the yen, the dollar edged 0.1 percent lower to 114.65, remaining shy of last week's 115.51 peak, its highest level since January 19, as expectations built for the rate increase.
The Bank of Japan also began a two-day monetary policy meeting on Wednesday. It is expected to hold its policy steady and stress that inflation is nowhere near levels that justify talk of withdrawing its massive stimulus. Sterling gained to a week's high of $1.2258 in early trade in Europe, rebounding from the previous day's eight-week low hit on worries of a painful and prolonged Brexit.
The pound was last up 0.3 percent on the day at $1.2195, dipping below $1.22 after UK data showed wage growth slowed in the three months to January. British Prime Minister Theresa May won parliamentary backing on Monday to begin the process of leaving the European Union, as Scotland considered another referendum on independence from the UK. The euro edged up 0.2 percent to $1.0624, as concern about Wednesday's Dutch parliamentary election was offset by market speculation the European Central Bank may be ready to wind down its stimulus programme.
"The market is relatively calm as most people don't expect the populist party to win the election," said Commerzbank analyst Thu Lan Nguyen in Frankfurt. The Dutch vote, taking place amid a diplomatic row between the Netherlands and Turkey, is being closely watched as a test of populist and anti-immigrant sentiment in Europe, before national elections in France next month and in Germany in September. The dollar index, which tracks the greenback against a basket of six rival currencies, was off 0.1 percent, at 101.58.