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The US dollar was little changed on Wednesday as markets turned their focus on the end of the Federal Reserve’s two-day meeting.  

The US dollar index, which weighs the greenback against a basket of major currencies, slightly gained 0.02 percent to $93.75. Since August, the index has dropped by about 3 percent.

The dollar-yen pair meanwhile fell 0.1 percent to 112.83. Japan’s government spokesman announced on Friday that Japanese Prime Minister Shinzo Abe and US President Donald Trump will hold a summit on September 26 to discuss the promotion of bilateral trade following a round of trade talks.

As the People’s Bank of China (PBOC) set the yuan reference at 6.8571 against Tuesday’s 6.8440, the greenback rose 0.1 percent to 6.8766 against the yuan.

Elsewhere, the New Zealand dollar climbed 0.1 percent to 0.6657 against its US counterpart, after rising as high as 0.6682 due to a better-than-expected business confidence report.

Data from the Australia and New Zealand Banking Group Ltd. (ANZ) showed New Zealand’s September business sentiment came in at -38.3 percent, compared to -50.3 percent in August which was its lowest since 2008.

Fed Rate Hike Probability

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Investors are awaiting details of the Fed meeting that should provide signs whether policymakers will hike interest rates for third time this year.

The probability the central bank will lift its rates by a quarter of a percentage point later in the day is almost at 95 percent, according to an analysis of fed fund futures contracts by a US financial market firm.

Fed’s benchmark overnight lending rate is currently set in a target range between 1.75 percent and 2.00 percent.

A US investment bank expects the Fed will hike rates four times in 2019, quicker than the three rate increases suggested by policymakers in their projections in June, or the two to three hikes predicted by investors.

Analysts said markets are expecting another rate hike before the end of 2018, but the outlook for next year is uncertain.

Some analysts on the other hand, are anticipating a more aggressive tilt, whether it ends up in the policy statement set to be published later in the day, the related economic and interest rate forecasts from policymakers, or Fed Chairman Jerome Powell’s press conference after the conclusion of the meeting.

Economists Joseph Lavorgna and Thomas Julien stated that financial markets should be ready for a more hawkish tone, as another quarter of 4 percent real gross domestic product (GDP) growth along with faster wage gains could push policymakers to err on the side of aggressiveness at some point.

Investors may soon need to cope with the fact that the Fed is going to press harder to dampen ebullient economic activity, they said.

For the second quarter, GDP rose at 4.2 percent annualized rate, according to data published by the US Commerce Department on August. Economic expansion was at 2.2 percent in the first quarter.

The central bank estimated a 2.8 percent economic growth in June which has since been increased by several central bank officials.

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