The dollar index consolidated recent gains near the 99 level on Wednesday, not far off a 21-month high of 99.4 touched last week, as investors awaited a key Federal Reserve decision where it is widely expected to announce a quarter-point interest rate hike to tame surging inflation. US Treasury yields also rose to their highest in more than two-and-a-half years ahead of the announcement, providing support to the greenback. 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.