By Peter Nurse

Investing.com – The dollar edged higher in early European trade Wednesday, but moves have been capped ahead of the conclusion of the crucial Federal Reserve meeting later in the session. 

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 93.255, just off Tuesday’s high of 93.455, the strongest level since Aug. 23.

rose 0.3% to 109.54 after the kept its negative interest rate and asset-buying targets unchanged earlier Wednesday, as largely expected, while flagging Covid-linked pressures on the economy.

edged lower 0.1% to 1.1721, fell 0.1% to 1.3651, while the risk sensitive rose 0.2% to 0.7252, rebounding from a three-week low, helped by an improvement in risk sentiment after China Evergrande Group (HK:) pledged to pay the scheduled coupon on a yuan bond that is due on Thursday.

Thursday’s highlight is Wednesday’s conclusion of the most recent. Traders will be watching to see whether the central bank announces a reduction in asset purchases later in the year.

“Markets may be more sensitive to any signals about the timing of monetary tightening as the Dot Plot projections are released along with other economic forecasts,” said analysts at ING, in a note. “It is quite a close call, but we do not expect the Median Dot Plot for the first rate hike to shift from 2023 to 2022.”

The central bank will release a statement at 2 PM ET (1800 GMT), plus updated quarterly estimates, including its dot plot of rate projections, to be followed 30 minutes later by a press conference from Chair Jerome Powell.

Meanwhile, rose 0.1% to 300.88 and climbed 0.1% to 352.70 after the Hungarian central bank increased its benchmark rate by just 15 basis points to 1.65% on Tuesday, halving the 30 bps hikes it has undertaken in each of the past three months.

It is trying to manage rising inflation and fallout from the current wave of global pandemics.

Traded 0.1% lower at 6.4686. The yuan was weakening in spite of reduced tensions surrounding China Evergrande Group, a property company. It gained support after Harbin, a northeastern Chinese city went into semi-shutdown following the discovery of new COVID-19 cases.