NEW YORK: The US dollar dipped on Wednesday before the Federal Reserve will release minutes from its December meeting, while the Aussie outperformed on reports that China will remove a ban on Australian coal imports.

Traders will scour Wednesday’s meeting minutes for indications that Fed officials are concerned about persistent inflation even as the bank slows the pace of its rate increases.

Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, sees Wednesday’s dollar weakness as a buying opportunity on the likelihood that the minutes may be more hawkish than most expect.

“The market is underestimating the chances of a 50 basis point rate hike at the FOMC meeting that ends on February first,” Chandler said.

Solid jobs data is seen as giving the Fed room to continue hiking rates as it battles to bring down price pressures.

Chandler noted that the Federal Reserve Bank of Atlanta on Tuesday also raised its fourth quarter estimate for gross domestic product to 3.9%, from 3.7%, showing strong growth of more than 3% for the second consecutive quarter.

Fed fund futures traders are pricing in a 69% likelihood that the US central bank will continue to slow the pace of its rate hikes in February to 25 basis points. That comes after a 50 basis point hike in December, and four consecutive 75 basis point increases before that.

They also see the US central bank cutting rates this year even as Fed officials stress the need to hold rates higher for longer to bring down inflation. The fed funds rate is expected to peak at 4.95% in June before falling to 4.51% by year-end.

Jobs data for December is this week’s major US economic focus and is expected to show that employers added 200,000 jobs in the month, while average hourly earnings are predicted to have risen 0.4% in December for an annual increase of 5%.

The dollar index against a basket of currencies was last down 0.64% at 104.04, after reaching a two-week high of 104.86 on Tuesday.