Investing.com - The dollar was on the backfoot against its rivals Tuesday, shrugging off stronger U.S. economic data and the prospect of further monetary policy tightening as the two-day Fed meeting got underway.
The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.12% to 93.74.
A surge in consumer confidence to a nearly-18-year high did little to lift the greenback, despite analysts touting stronger U.S. economic growth, led by a stronger consumer.
The Conference Board’s consumer confidence gauge rose to 138.4 in September from 134.7 last month, beating economists’ forecast for a reading of 132.2.
"Overall, consumer spending growth appears to be solid and will be a major contributor to growth in the third quarter, despite slowing slightly from the second-quarter pace," CIBC said.
The dollar doldrums come as the Federal Reserve kicked off its two-day meeting, which is expected to culminate Wednesday in a 25-basis-point interest rate hike to a range of 2.00% to 2.25%.
As well as an interest rate decision, the Federal Reserve will also serve up its summary of economic projections, outlining policymakers' expectations on economic growth, inflation and unemployment.
The dot plot, a projection of policymakers future interest rate expectations, is expected show an median increase to 3.6% for 2020, RBC said in a recent note to clients. This would allow the Fed to show that rates would remain on hold in 2021 at that level, the bank added.
The euro and sterling, meanwhile, tacked on gains against the greenback as investors continued to bet the UK and EU will reach an agreement on a Brexit deal.
GBP/USD rose 0.35% to $1.3165, EUR/USD rose 0.12% to $1.1763.
The euro pared some gains, however, following dovish comments from European Central Bank policymaker Peter Praet, who downplayed President Mario Draghi upbeat comments on inflation from a day earlier.
Elsewhere, USD/CAD fell 0.05% to C$1.2949, paring intraday gains, which followed downbeat remarks on a U.S.-Canada trade deal from U.S. Trade Representative Robert Lighthizer.
Lighthizer said there was still a fair amount of distance on North American Free Trade Agreement negotiations between the U.S. and Canada, blaming the latter for not making concessions on key issues.