Dollar weakens

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Masashi Murata

LONDON: The dollar edged towards 2-1/2-year lows hit earlier this month on Wednesday, as investors waited to see whether U.S. ratesetters would signal tighter policy or hold off because of tepid inflation data.

The U.S. Federal Reserve concludes a two-day policy meeting on Wednesday, and investors are looking for clues on a potential December rate hike and cuts in a massive balance sheet run up through years of post-crisis money-printing. But caught between a lull in U.S. inflation and a strengthening global economy, the market is uncertain whether the Fed will signal its third interest rate hike of the year or back off until prices rise more briskly.

"Fed members have become less hawkish of late, and that has started to weigh on the dollar," said OANDA analyst Craig Erlam. "We are likely to find out today if (the dollar) can go any lower or if it has bottomed out. It is a big test. "The index that measures the greenback against a basket of major currencies was 0.1 percent lower and not far from the 2-1/2-year low hit earlier this month. The currency has fallen more than 11 percent this year so far, as expectations for pro-growth, pro-inflation policies from U.S. President Donald Trump -- the so called "Trumpflation trade" -- have receded, making the Fed´s monetary policy path trickier.