Investing.com - The U.S. dollar was on the backfoot on Wednesday, as markets awaited signals from the Federal Reserve on its plans for next year.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was down 0.3% at 96.28 by 3:40AM ET (09:40 GMT), hovering near a one-week low.
The U.S. central bank is almost certain to raise interest rates by a quarter point for a fourth time this year at the conclusion of its two-day policy meeting at 2:00PM ET (19:00 GMT) on Wednesday.
That would put the fed funds target range in a range between 2.25%-2.5%.
Fed Chair Jerome Powell will hold what will be a closely-watched press conference 30 minutes after the release of the Fed's statement, as investors look for fresh clues on the Fed's pace of monetary policy tightening next year.
Another issue to watch will be Powell's assessment of the growing external risk from an increasingly long list of sources, including a global trade war, and recent signs of stock market turmoil.
The U.S. central bank will also release new forecasts for economic growth and interest rates, known as the "dot-plot", as investors look for greater signs of the Fed's likely rate hike trajectory through 2019 and beyond.
While policymakers have pointed to three increases in 2019, the market is starting to bet the U.S. central bank may halt its rate hikes altogether next year as risks to the U.S. economy mount.
However, some analysts still see the Fed raising rates 2-3 times in 2019.
"We think the Fed would raise rates twice in 2019. The Fed's reaction function will be very data dependent next year," said Stephen Innes, head of trading, APAC at Oanda.
Elsewhere, the greenback was weaker against the yen, with USD/JPY losing 0.15% to trade at 112.35. It earlier reached the lowest since Oct. 29 at 112.60.
The euro pushed higher, with EUR/USD rising 0.35% to 1.1400, its best level since Dec. 10.
The pound was also higher, with GBP/USD advancing 0.15% to 1.2660 amid an ongoing political deadlock over Britain’s efforts to exit the European Union.
-- Reuters contributed to this report