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Forex - Dollar steady as markets count down to Fed decision

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Investing.com -

Investing.com - The dollar was steady close to one-week highs against a basket of other major currencies on Wednesday as markets counted down to an expected interest rate increase by the Federal Reserve later in the day.

The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was at 98.24, holding just below Tuesday's high of 98.35.

EUR/USD was at 1.0933 little changed for the day, having retreated from a six-week high of 1.1059 on Tuesday.

The dollar pushed higher against the yen, with USD/JPY easing up 0.2% to 121.92.

Most investors expect the U.S. central bank to raise interest rates for the first time since June 2006 at the conclusion of its final policy meeting of 2015.

Data on Tuesday showing that U.S. core inflation rose 0.2% in November from a month earlier, even as headline inflation remained flat, cemented expectations for a rate hike.

Higher interest rates would make the dollar more attractive to yield-seeking investors in the long run, but a rate hike could also trigger dollar selling in the immediate aftermath.

With a rate hike priced in investors are now focusing on how quickly the Fed will tighten monetary policy in 2016. The Fed has indicated that the pace of rate hikes will be gradual.

The Fed is expected to announce its monetary policy decision at around 2 pm Eastern Time on Wednesday. Fed Chair Janet Yellen is to hold a press conference shortly after the announcement.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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