Investing.com - The dollar edged lower against most major currencies in afternoon trading on Tuesday as investors backtracked on previous bets the Federal Reserve's monetary policy statement due out Wednesday could contain hawkish language.
In U.S. trading on Tueday, EUR/USD was up 0.15% at 1.2961.
The Federal Reserve will announce its latest statement on monetary policy this Wednesday, and expectations for the U.S. central bank to cut its monthly bond-buying program to $15 billion from $25 billion kept the greenback firm.
Investors were also hoping to see a timetable as to when U.S. interest rates may rise, though by afternoon trading, Wall Street Journal reporter Jon Hilsenrath said in a webcast that the Fed will say rates will remain low for a "considerable time," a phrase the bank often uses, and instead focus more on wording the closing of its bond-buying program.
Hilsenrath's opinion found followers, as investors took up positions betting that the Fed will try avoid overwhelming markets by discussing the end of stimulus programs alongside a change in forward guidance, leaving the latter for a future policy meeting.
Elsewhere, reports that the People Bank of China is set to provide CNY500 billion of liquidity to the country’s five largest banks to stimulate the economy also softened the dollar as investors flocked to stocks.
Elsewhere on Tuesday, official data showed that U.S. producer price inflation was flat last month, compared to expectations for a 0.1% rise after a 0.1% gain in July.
Core PPI, which excludes food, energy, and trade rose 0.1% in August, in line with expectations, after an increase of 0.2% in July.
The dollar was down against the yen, with USD/JPY down 0.01% at 107.17, and down against the Swiss franc, with USD/CHF down 0.27% at 0.9327.
The greenback was up against the pound, with GBP/USD up 0.30% at 1.6282.
Sterling remained under pressure but came off earlier lows due to uncertainty over the outcome of Thursday’s referendum on Scottish independence.
The latest opinion polls on the Scottish referendum have indicated that the outcome of the vote is too close to call.
Concerns over the prospect of a yes vote pounded sterling, as recent polls indicated that support for the yes vote had edged into the lead for the first time since the start of the pro-independence campaign.
Uncertainty over what currency an independent Scotland would use, concerns over how much of the U.K. national debt it would take on and the fate of U.K. oil and military activities have rattled financial markets.
Bank of England Governor Mark Carney warned last week that a currency union between an independent Scotland and the rest of the U.K. would be "incompatible with sovereignty."
Earlier Tuesday, the Office for National Statistics reported that the annual rate of U.K. consumer price inflation slowed to 1.5% last month from 1.6% in July, in line with forecasts.
The reading matched the five-year low seen in May. The slowdown in inflation was mainly due to lower prices for fuel, food and non-alcoholic drinks the ONS said.
Consumer prices inched up 0.4% in August, in line with forecasts.
While the rate of inflation fell, a separate report showed that U.K. house prices rose at the fastest pace in seven years in July.
Average U.K. house prices jumped 11.7% in the year to July, the ONS said, and were up 19.1% in London on a year-over-year basis.
The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.78% at 1.0969, AUD/USD up 0.74% at 0.9095 and NZD/USD up 0.26% at 0.8197.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.16% at 84.23.
On Wednesday, markets will move on the Federal Reserve's statement on monetary policy followed by Fed Chair Janet Yellen's press conference.
Elsewhere, the U.S. is to produce data on consumer prices, while the euro zone is to release revised data on consumer price inflation.