Dollar Holds Firm Ahead of Fed Decision as Aussie Falls on Inflation Data

The US dollar maintained its strength on Wednesday, holding near a one-month high as investors awaited the Federal Reserve's interest rate decision. Meanwhile, the Australian dollar fell after inflation data came in below expectations, reducing the chance of further rate hikes from the Reserve Bank of Australia.

The Australian dollar slid 0.37% lower to $0.69475, while other major currencies like the euro and sterling also saw losses. The euro was nursing losses after falling to a one-month low in the previous session, inching up 0.03% to $1.1389.

The dollar's firmness is attributed to hostilities flaring anew in the Middle East, which has pushed oil prices higher, adding to inflation fears. Sim Moh Siong, a strategist at OCBC, said that while he doesn't expect a Fed hike, 'the messaging will be more important than the decision.' If the Fed stays on hold and provides hawkish guidance, the dollar is likely to stay supported.