The dollar was steady against the euro today but fell against the yen after Japan seemed to rule out any near-term intervention to cap its currency's strength.
But dealers said trading conditions were very thin ahead of the Fed's interest rate decision at 7.15 p.m. The key lending rate was widely expected to be trimmed by 25 basis points, but traders were alert to a possible bigger cut.
A Reuters poll showed all 25 primary dealers, who work directly with the Fed in fixed income markets, said the central bank will cut its federal funds target for short-term interest rates a quarter point to 3.50 per cent.
But analysts said a larger cut could not be ruled out as there were still no convincing signs of an economic rebound.
They said the dollar's reaction to a bigger cut was difficult to call. Although the currency might rally as US equities responded favourably to lower borrowing costs, the combination of a lower yield and fears the Fed knew of more bad economic news to come might push the greenback down.
So far this year, the Fed has cut rates by 2.75 percentage points to 3.75 per cent, taking US rates to their lowest in over seven years.
The euro was steady on news the European Central Bank allocated euro 83 billion in 14-day refinancing agreements at 4.50 per cent and above for a weighted average rate of 4.51 per cent - unchanged from last week's allocation.