The dollar swung higher on Wednesday while the yen clawed back some losses as investors adjusted positions in the final hours before the Federal Reserve's policy meeting, which is expected to kick off its easing cycle.
The Fed is expected to cut interest rates for the first time in more than four years at 1800 GMT, with markets pricing in a 50 basis point rate cut.
The dollar and U.S. bond yields have been falling since July. The dollar was at 1.1119 per euro, holding near this year’s low of 1.1201 per euro, as easing in the United States is expected, with more than 100 basis points of interest rate cuts expected by year-end.
The yen has risen more than 12 percent since July and continues to rise as the Bank of Japan moves toward monetary tightening, in contrast to the expected decision by the US central bank. The Bank of Japan makes its monetary policy decision on Friday.
The yen rose 0.7 percent to 141.41 per dollar on Wednesday, recouping some of its overnight losses. The Japanese currency also rose 0.6 percent against the euro to 157.24 yen, according to Reuters data.
The Australian dollar briefly touched a two-week high of $0.6773, while higher milk prices supported the New Zealand dollar to $0.6196, although the moves were tentative ahead of the Fed meeting.
Sterling was steady at $1.3158 after rising on signs of a healthy economy and steady inflation. British inflation data is due later on Wednesday, while the Bank of England is expected to keep interest rates on hold at 5 percent on Thursday, with only a 35 percent chance of a cut.
