Dollar Hangs On Amid Bets on US Hiking Cycle

The US dollar is holding onto its recent gains as traders expect the Federal Reserve to hike interest rates for the first time in several months. The Fed's decision on Wednesday has sparked speculation about a possible cycle of rate hikes, with some analysts predicting a modest boost to the dollar if the central bank increases rates.

Currency strategist Carol Kong from the Commonwealth Bank of Australia notes that a 25-basis-point increase is around 90% priced in, implying a modest gain for the dollar. However, there's also a small chance the dollar could ease if the Fed hikes but Chair Kevin Warsh downplays the risk of follow-up hikes in the press conference.

The euro and sterling have not moved much against the dollar, with the euro trading near its one-month low and sterling hovering above its six-week trough. The Bank of England is expected to keep rates steady when it meets on Thursday.