The US dollar experienced a slight decline on Wednesday but remained near a two-week high ahead of an anticipated interest rate increase by the US Federal Reserve later in the day. 

Investors closely monitored the forthcoming remarks from Fed Chair Jerome Powell.

The US dollar index, which measures the currency against six major peers, edged 0.2% lower to 101.09 yet remained close to the two-week high reached on Tuesday. 

Money market traders viewed a quarter-point hike from the Fed later in the day as almost certain, though opinions were divided on the likelihood of another hike later in the year.

Esther Reichelt, an FX analyst at Commerzbank, emphasized that market reaction would depend heavily on Powell’s comments and other aspects surrounding the meeting rather than just the 25 basis point increase.

The dollar’s rebound from a 15-month low last week to its current position has been influenced by signs of the US economy’s resilience in the face of the Federal Open Market Committee’s aggressive interest rate increases. 

The recent data showing a two-year high in US consumer confidence in July, despite a tight labor market and receding inflation, has bolstered the dollar index.

In addition to the Fed’s decision, the European Central Bank (ECB) is set to announce its policy on Thursday, with a quarter-point hike widely anticipated.

However, concerns have arisen due to mounting evidence of an economic slowdown, raising doubts about another hike by year-end. The euro saw a modest rise of 0.2% to $1.1081 after hitting a two-week low on Tuesday.

Meanwhile, the Bank of Japan (BoJ) is scheduled to announce its policy on Friday. 

Speculation about a hawkish tweak to its yield curve control policy, which was high earlier this month, has recently subsided. The dollar declined 0.44% to 140.35 yen, recovering from a multi-week low of 137.245 mid-month.

The Australian dollar also faced a setback, sliding 0.5% to $0.6757 following slower-than-expected inflation data, which suggested the Reserve Bank of Australia (RBA) might not pursue a rate hike on August 1. 

This decline reversed much of the Aussie’s previous day’s gain after Beijing’s stimulus announcement, which improved the economic outlook for Australia’s key trading partner.

As the market awaits the Bank of England’s rate decision on August 3, the sterling edged 0.1% higher at $1.2919. There is a divide in money markets between expectations of a 25 basis point or a 50 basis point rate hike by the Bank of England.