Dollar Pauses Ahead of Fed Decision Amid Middle East Tensions

The US dollar paused its climb on Wednesday but held near a one-month high as traders awaited a Federal Reserve interest rate decision later in the day.

Hostilities in the Middle East flared anew, sending oil prices higher after the US and Saudi Arabia launched strikes on Iran-backed groups in Iraq. This move had a ripple effect on currencies, with investors staying on the sidelines ahead of the Federal Open Market Committee's decision.

The dollar index eased 0.15% to 101.27, while the euro was nursing losses after falling to a one-month low in the previous session. Sterling edged higher but remained near its weakest level since July 1.

Sim Moh Siong, a strategist at OCBC, noted that the Fed is shifting in a more hawkish direction. He expects no rate hike but believes the messaging will be more important than the decision, which could keep the dollar supported.