Forex - Dollar Steady Before Fed, Pound Rebounds Slightly

The dollar was holding steady against a currency basket on Wednesday ahead of the Federal Reserve’s rate decision later in the day where policymakers were widely expected to deliver their first rate cut in more than a decade.

With a quarter percent rate cut already priced in, the main focus was on whether the Fed would leave the door open for further policy easing in a bid to insulate the world's largest economy from slowing global growth and the fallout of trade conflicts.

"The Fed will likely try and not dash the prospect of a future rate cut held by the markets. But at the same time Chairman (Jerome) Powell is certainly not in a position to promise an upcoming cut, so he is expected to keep his wording as vague as possible," said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

"Any vague policy references would provide the dollar with an extra lift as it would further temper excessive easing hopes."

The U.S. dollar index against a basket of six major currencies stood little changed at 97.82 by 04:07 AM ET (08:08 GMT) after pulling back from a two-month high of 98.206 touched on Tuesday.

The greenback traded a shade lower at 108.53 yen and the euro was steady at 1.1150. The Bank of Japan on Tuesday left policy settings steady though some suspect a move to further ease monetary conditions might not be far off.

The pound, which has tumbled this week as investors rushed to factor in the possibility of Britain leaving the European Union without a deal, managed to rebound slightly. Sterling was 0.16% higher at 1.2164, crawling back from a 28-month trough of 1.2120 plumbed on Tuesday.

Troubles for the currency, which has lost 4.3% in July, were still seen to be far from over as Britain's new prime minister Boris Johnson took over with the explicit agenda of pulling the country out of the EU by Oct. 31, whether transitional trading agreements are in place or not.