Dollar Eases Ahead of Fed Decision Amid Hawkish Fears

The US dollar has eased slightly as investors await the Federal Reserve's interest-rate decision on Wednesday. Despite this, the currency remains within familiar ranges against major currencies.

Market volatility has been low ahead of the Fed's announcement, with some analysts warning that an interest rate hike cannot be ruled out. The market is pricing in a 36% chance of a 25-basis-point increase.

The dollar index, which tracks the US currency against six others, was down 0.04% at 101.38. Analyst Kyle Chapman from Ballinger Group in London noted that the Fed's decision could lead to an immediate repricing of short-term rates, hurting the dollar if it is seen as hawkish.

The euro and sterling were relatively stable, with the euro up 0.03% at $1.138875 and sterling about flat at $1.32925. The loonie was trading 0.2% higher at C$1.4085 to the greenback, or 70.98 US cents.

Some brokerages have started to pencil in the risk of a surprise rate hike due to limited guidance from Fed Chair Kevin Warsh and higher oil prices. Nick Rees from Monex Europe noted that there is genuine uncertainty around this meeting, which could lead to some volatility on the outcome.