US dollar index erases gains, turns flat after FOMC meeting minutes

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The U.S. dollar index erased earlier gains on Wednesday after documents from the Federal Reserve showed the next interest rate increase could be soon.

On Wednesday, minutes from the Fed's last policy meeting showed policymakers thought it may be appropriate to raise interest rates again "fairly soon" should jobs and inflation data come in line with expectations.

The minutes of the Jan. 31-Feb. 1 discussion, at which the U.S. central bank voted to keep rates unchanged, also showed the depth of uncertainty at the Fed over the lack of clarity on the new Trump administration's economic program.

The dollar index fell flat immediately after the announcement, down 0.1 percent on the day. The U.S. dollar fell 0.5 percent at 113.05 yen, while euro was up nearly 0.3 percent at $1.0562.

Earlier in the day, the euro recovered from its weakest level against the dollar in six weeks after far-right French presidential candidate Marine Le Pen's perceived chances of winning fell, reducing concerns given the candidate's anti-EU stance.

Veteran French centrist Francois Bayrou said Wednesday he was offering an alliance with independent candidate Emmanuel Macron, a move that could give the former investment banker a much-needed boost to reach the runoff in May's presidential election.

"Without a doubt, political uncertainty has been one of the greatest risks for the euro," said Kathy Lien, managing director at BK Asset Management in New York.

Demand for the safe-haven yen fell following Bayrou's statement, reducing the dollar's losses against the Japanese currency. The dollar was essentially flat at 113.58 yen after slipping as much as 0.7 percent to a session low of 112.91 yen in morning U.S. trading.

So far, concern that Le Pen could win and deliver a fatal blow to the euro project have played out chiefly on the currency options market, where investors pay less to bet on the currency falling.

Implied volatility for the next three months, which allows investors to protect themselves from swings in the currency - or bet on such volatility - rose to the highest since mid-December.

—CNBC's Berkeley Lovelace Jr. and Jeff Cox contributed to this report.