USD is heading for a decline with the anticipation of raising interest rates

The dollar moved further away from its highest level in 20 years on Wednesday before the Federal Reserve meeting. The US central bank is expected to raise interest rates by another 75 basis points to rein in spiralling inflation.

However, trading in the currency markets was limited as traders awaited the rate hike announcement at 1800 GMT.

Money markets are betting that the Federal Reserve will raise interest rates by 75 basis points, with a chance of a larger increase of 100 basis points later this year. Traders expect the Federal Reserve to raise the interest rate to 3.4 percent by the end of the year to help bring inflation back to the target level.

The expectation of a significant interest rate hike helped push the dollar index, which measures its value against a basket of six currencies, to its highest level in nearly 20 years earlier this month at 109.29 and is now up 2.1 percent in July.

By 1055 GMT, the dollar index was down 0.2 percent to 106.93.

The euro rose 0.33 percent to 1.0149 against the dollar, but failed to recover many of Tuesday’s losses of 1 percent, its biggest drop in more than two weeks, after fears of a recession in Europe increased when Russia cut gas supplies to the continent via the Nord Stream 1 pipeline. .

The Australian dollar rose 0.12 percent to 0.69455 against the US dollar, as the pace of inflation in Australia accelerated to a 21-year high in the fourth quarter of the year.

The dollar fell 0.2 percent to 136.69 against the yen. It also fell 0.2 percent to 0.9612 against the Swiss franc.

In terms of cryptocurrencies, Bitcoin settled at $21,301.