The dollar rose to a nearly three-week high against a basket of major currencies on Tuesday, as investors awaited clues from the Federal Reserve on its outlook for the U.S. economy and how many interest rate increases it may embark on in 2018.
The futures market implied traders widely expected Fed policymakers would raise key borrowing costs by a quarter point to a target range of 1.50 percent to 1.75 percent after the conclusion of a two-day meeting on Wednesday.
Investors will watch for new quarterly forecasts from Fed officials due at 2 p.m. on Wednesday, followed by a press conference from Jerome Powell, his first as Fed chief.
"Except for the fact that it's going to be Jerome Powell's first press conference, the outcome is mostly a given," said Alfonso Esparza, senior currency analyst at OANDA in Toronto, said.
"I remember Janet Yellen's first press conference. They are usually not used to this sort of interaction with the press and sometimes they let slip more than they want to," he said.
Market participants will track the Fed's economic projections for clues to a possible fourth rate hike this year, analysts said.
"The dollar remains in wait-and-see mode ahead of tomorrow's FOMC meeting, with everyone awaiting the reveal of the dot plot and the tone of the presser," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.
An index tracking the greenback versus a basket of six currencies rose 0.72 percent, to 90.41.
The dollar rebounded from Monday's losses against the yen following comments from Masayoshi Amamiya, one of the two new deputy governors at the Bank of Japan.
Amamiya told reporters earlier on Tuesday there is a need to stick with an easy monetary policy to support the economy.
The greenback was last up 0.40 percent, at 106.50 after touching a nearly one-week peak at 106.60 yen.
The euro retreated on a sharp drop in confidence among German investors in March according to a ZEW research institute survey. The single currency was last down 0.72 percent, at $1.2245.
Sterling eased as weaker-than-forecast British inflation figures supported the view the Bank of England will likely leave rates unchanged for the foreseeable future.