Dollar Firms Ahead of Fed Decision Amid Oil Price Surge

The US dollar has firmed ahead of key policy decisions from major central banks. The yen's recent rally is sputtering near a seven-month high as investors weigh possible rate hikes from the Federal Reserve and Bank of Japan.

Oil prices have surged above $100 per barrel, pushing up inflation concerns and dampening risk sentiment. Global policymakers are grappling with erratic pricing pressures amid worsening tensions in the Middle East.

Traders expect a Fed rate hike this week, with 86% odds priced in according to the CME FedWatch tool. Markets are heavily conditioned for a hawkish week, making the bigger FX surprise risk not who hikes but who fails to validate current pricing.

The euro is softer at $1.1565, while sterling last bought $1.3503. U.S. Treasury yields remain near multi-year highs, with the 2-year yield inching away from a two-year high to 4.61%.