Dollar Steadies Ahead of Fed Decision Amid Oil Price Uncertainty

The US dollar has stabilized ahead of Wednesday's Federal Reserve decision, but faces potential downside risks. One factor that could ease safe-haven demand for the currency is the recent de-escalation in the Middle East, although uncertainty remains regarding future developments in the region.

Falling oil prices have also eased inflation concerns, leading to lower Treasury yields. This, in turn, may soften expectations for monetary policy tightening and weigh on the dollar.

Despite this, markets continue to anticipate two interest rate increases by year-end, setting a floor for the currency and yields. The outlook could shift depending on how oil prices and Middle East developments evolve.