After climbing higher amid rising speculation the Federal Reserve and several other central banks will aggressively hike interest rates to fight inflation, the U.S. dollar pared gains with traders turning slightly cautious.
The Fed is widely expected to announce another 75-basis point hike interest rates. CME Group's FedWatch Tool is currently indicating an 84% chance of a 75 basis points rate hike and a 16% chance of a 100 basis point rate hike.
The Bank of England meets on Thursday, with markets split on whether the central bank will raise rates by 50 or 75 basis points ahead of a mini budget to be unveiled by the new Chancellor of the Exchequer Kwasi Kwarteng on Friday.
The dollar index climbed to 110.18 in the European session, but dropped to 109.60, below the previous close of 109.76.
Against the Euro, the dollar traded at $1.0025, down from the previous close of $1.0016.
The dollar was up against the Japanese currency, fetching 143.26 yen a unit
Against Pound Sterling the dollar weakened to $1.1434, after firming to $1.1355 earlier in the day.
