The dollar rose on Wednesday and was trading near a seven-week high against the yen, ahead of a Federal Reserve policy meeting where officials are widely expected to cut interest rates by a quarter of a percentage point. Many investors, however, were pricing in less aggressive action from the Fed going forward as inflationary pressures and wage growth have been steady, even as pockets of the US economy, such as the service sector, have shown steady improvement.

"The Fed is likely to deliver a hawkish cut, reflecting a mix of positioning and expectations," said Mark McCormick, global head of FX strategy, at TD Securities in New York. "The Fed will leave room to do more...and the dots are unlikely to offer a crystal clear path to steeper cuts down the road." Fed officials' median projection on the number of rate moves is commonly referred to as its "dot-plot."

In morning trading, the dollar edged up 0.1% to 108.18 yen, just below a seven-week high of 108.37 yen tested overnight. The dollar index, tracking the unit against a basket of other currencies, rose 0.1% to 98.352. The dollar has been driven more by trade tensions between Washington and Beijing this year than by US monetary policy, analysts said. The dollar has gained nearly 1% against the yen since the last rate cut in July. The euro slipped 0.1% to $1.1056, still higher than the $1.0927 reached last week, the lowest in more than two years.

Copyright Reuters, 2019