The dollar index consolidated recent gains around the 99 level on Tuesday, not far off a 21-month high of 99.4 touched last week, as the Federal Reserve is set to start a two-day policy meeting where it is widely expected to raise interest rates by 25 basis points to tame soaring inflation.
Latest data showed the US annual inflation rate accelerated to 7.9% in February, matching expectations but rising to a fresh 40-year high. The data came amid growing concerns over a commodity-driven rise in inflation spurred by the Russia-Ukraine war, leaving central banks with a balancing act between curbing inflation and supporting growth.
Investors will also be watching for adjustments to the economic outlook, the path of rates and the likely schedule of asset tapering given added uncertainty from the Russia-Ukraine war.