The U.S. dollar remained close to a one-month peak on Wednesday amid renewed hostilities in the Middle East, as market participants anticipated a significant Federal Reserve interest rate decision later in the day. The Australian dollar experienced a decline following the release of inflation data that fell short of expectations, thereby diminishing the likelihood of additional rate hikes from the Reserve Bank of Australia. It experienced a decline of 0.37%, settling at $0.69475.

In the broader market, movements in currencies remained largely subdued as investors opted to remain on the sidelines in anticipation of the Federal Open Market Committee’s decision, with markets assigning a 33% probability to a 25-basis-point increase. In addition to inflation concerns, oil prices experienced an uptick following reports from the U.S. military regarding the interception of multiple ballistic missiles launched by Iran aimed at U.S. forces in the Middle East. The euro was experiencing losses after declining to a one-month low in the previous session, edging up 0.03% to $1.1389.

Sterling eased 0.03% to $1.3287, remaining near its weakest level since July 1. The New Zealand dollar experienced a decrease of 0.08%, settling at $0.5783. “Going to the meeting itself, I think what’s clear is that the Fed is ​shifting in a more hawkish direction,” said Sim Moh Siong. “We are expecting no ‌Fed ⁠hike, but I think the messaging will be more important than the decision. So if the Fed stays on hold and provides a bit of a hawkish guidance, then I think the dollar is likely to stay supported.” The dollar was firm at 101.38 against its peers and stood near a 40-year peak against the yen at 163.74.

The ongoing depreciation of the yen has prompted traders to remain vigilant for any possible intervention by Japanese authorities aimed at stabilising the struggling currency. “There is a possibility that ​the FOMC’s ⁠policy decision and the Chair’s press conference could trigger a further strengthening of the dollar, pushing USD/JPY to 164,” said Hirofumi Suzuki. “The likelihood of FX intervention ⁠appears ​significant, as Japanese financial authorities have stepped up their ​warnings. In terms of timing, if the yen depreciates further following the BOJ’s Monetary Policy Meeting, that could ​provide a trigger for intervention.”