TOKYO: The dollar approached a three-week high against the yen and stood tall against the euro on Wednesday ahead of the Federal Reserve's policy meeting, which could give clues on how many more rate hikes might come out of the US this year.
The Fed concludes its two-day policy meeting later on Wednesday, at which it is widely expected to hike rates for the second time this year.
Market focus is on whether the Fed signals tightening policy four times in 2018, from the three times indicated earlier this year, after the world's largest economy has expanded steadily.
The dollar index against a basket of six major currencies inched up 0.03 per cent to 93.829 after rising 0.25 per cent the previous day.
The dollar was 0.1 per cent higher at 110.455 yen after brushing 110.55, its highest since May 23.
"There are views that the recent emerging markets turmoil could hold back the Fed from quickening the pace of its rate hikes. So the dollar would benefit if the Fed actually signals readiness to hike four times this year," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.
The euro was little changed at $1.1747 after slipping 0.35 per cent overnight.
In addition to the Fed, Thursday's ECB policy meeting is expected to dictate the euro's near-term direction.
Speculation that the ECB could signal intention to start unwinding its massive bond purchasing program had pushed up the euro to a three-week high of $1.1840 last week, although the common currency has been unable to sustain those gains.
"Expectations were that the ECB will be willing to hasten policy normalisation," Yamamoto at Mizuho Securities said. "However, I believe such expectations are overdone and the meeting could disappoint those hoping for hawkish rhetoric, which would explain the euro's recent weakness."
The pound was a shade lower at $1.3371, unable to hold gains made overnight when it briefly rose to $1.3424.
Sterling had popped higher on Tuesday after British Prime Minister Theresa May saw off a rebellion in parliament over amendments to a bill for the country's exit from the EU next year.
The Australian and New Zealand dollars were little changed at $0.7575 and $0.7007, respectively.