The dollar traded near a seven-week high versus the yen as oil markets recovered from a supply shock, but the focus is firmly on a U.S. Federal Reserve meeting later on Wednesday that is widely expected to deliver an interest rate cut.
Sterling traded near a six-week high versus the dollar as some speculators reduced excessive bets on a decline in the pound, but sentiment remained weak due to uncertainty over how the UK will exit the European Union.
Major currencies are likely to trade in narrow ranges before the Fed's meeting. Fed Reserve Chairman Jerome Powell has clearly broadcast his intention to cut rates, so some analysts warn that the dollar could actually bounce if the Fed eases policy as expected.
If there are no surprises from the Fed, the speculators will have to give up their dollar shorts.
Oil prices tumbled around 6% on Tuesday after Saudi Arabia's energy minister said the kingdom has tapped inventories to restore oil supplies to where they stood before drone attacks over the weekend shut around 5% of global oil output.
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