Dollar edges lower before Fed statement

NEW YORK: The dollar edged lower on Wednesday, as investors waited to see whether the Federal Reserve would signal it may raise interest rates again later this year even as inflation has remained below its 2 percent goal.

The US central bank is expected to release its latest policy statement at 2 p.m. (1800 GMT) after a two-day meeting where investors expected policymakers would decide to embark on a reduction of the Fed's $4.5 trillion balance sheet in October.

Fed officials for weeks have signaled a move to shrink the US central bank's holdings of Treasuries and mortgage-backed securities.

"It's not going to be so significant for the dollar at this stage," said Shaun Osborne, chief currency strategist at Scotiabank in Toronto.

What will drive the greenback in coming weeks will be the Fed's confidence on whether inflation would reach its 2 percent target and how many further rate increases it expects to carry out.

The recent deadly hurricanes that caused catastrophic damage in two southern US states might force the Fed to postpone a rate increase until next year, analysts said.

"The impact of the hurricanes may delay an increase so that's a risk," Osborne said.

The index that measures the greenback against a basket of six major currencies was 0.07 percent lower at 91.732 and not far from the 2-1/2-year low struck on Sept. 8.

The index has slid more than 11 percent this year, as expectations for pro-growth, pro-inflation policies from US President Donald Trump have diminished, complicating the Fed's monetary policy path.

The futures market implied traders saw a 57 percent chance of a December rate increase, little changed from on Tuesday, CME Group's FedWatch tool showed.

The New Zealand dollar gained 0.8 percent at $0.7378 after reaching its highest level in 6-1/2 weeks as one poll showed the country's National Party pulled ahead of the rival Labour Party ahead of a general election this weekend.

Support for the National Party jumped 6 points to 46 percent, according to the One News-Colmar Brunton opinion poll, while support for the opposition Labour party slumped by seven points to 37 percent.

Among emerging market currencies, the Mexican peso recovered from Tuesday's losses spurred by a second deadly earthquake that struck the country in two weeks.

The Mexican currency was last up 0.5 percent at 17.71 peso per dollar following a 0.2 percent decline on Tuesday.