Dollar nears multi-week high ahead of US Federal Reserve rate decision

The US dollar reached multi-week highs against major currencies on Wednesday, as markets awaited the Federal Reserve's interest rate decision. Traders anticipate that the decision could signal the start of a potential series of rate hikes, raising borrowing costs. Analyst Carol Kong from Commonwealth Bank of Australia stated there's a high probability of a 25 basis point rate increase, with the dollar potentially gaining slightly if the Federal Reserve lifts rates.

The dollar's gains were accompanied by rising bond yields, with it hitting its peak against the yen and New Zealand dollar. This surge pushed the New Zealand dollar to a two-month low of $0.5749 and the yen to a one-week low of 155.43 per dollar. Meanwhile, the euro settled near its one-month low of $1.1523, while the British pound remained close to its six-week low of $1.3464.

Australian dollar remained steady at $0.7126, as currency markets experienced limited volatility amid a global rise in bond yields.