LONDON: The dollar edged higher on Wednesday after falling the previous day, when a Russian currency crisis took hold and speculation grew that the Federal Reserve might take a more cautious tone on monetary policy.
After skidding oil prices helped Russia's rouble to plunge as much as 25 percent on Tuesday, an uneasy calm took hold, as Russia's finance ministry said it had started selling foreign currency from its leftover stock. That helped the rouble to gain sharply before it fell back again.
Data released earlier on Wednesday showed Japanese exports rose 4.9 percent in November, falling short of forecasts and helping the dollar regain much of the ground lost against the safe-haven Japanese currency on Tuesday.
The dollar last traded at 117.33 yen, up 0.8 percent on the day, as investors tentatively returned to riskier assets.
Many expect the Fed to drop its use of the phrase "considerable time" to describe how long interest rates will stay near zero in its final policy statement of the year, due at 1900 GMT. But some are betting plunging oil prices and the rouble's slide will make the central bank more cautious.
"It's fair to say that we're to a large degree on hold until we get a clear idea about what the Fed is actually going to do, and that matters most pertinently because of what it means for the oil price," said Simon Derrick, chief currency strategist at Bank of New York Mellon in London.
Derrick said if a change in the Fed's language prompted a surge in the dollar, oil prices may decline further, potentially feeding through into greater turmoil across markets.
The dollar also recovered ground against the euro, which was down about 0.4 percent at $1.2463 after rising to a three-week high of $1.2570 on Tuesday.
That helped the dollar rise 0.2 percent against a basket of major currencies to 88.323, up from a three-week low of 87.627 on Tuesday.
"The medium term forecast is still for a higher dollar, but the whole world is chaotic right now, with a slowdown in China, falling oil, and now Russia," said Kaneo Ogino, director at Global-info Co in Tokyo, a foreign exchange research firm.
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