The US dollar pared gains in the European session with all eyes now on the FOMC policy meeting in the early hours of the morning.
Against most major currencies, the dollar index, which measures the strength of the greenback, traded slightly lower at 106.90.
Markets now maintain expectations that the Federal Reserve (Fed) will increase interest rates by 75 basis points.
However, if the central bank acts aggressively with an increase of 100 basis points, the king of currencies the US dollar has the potential to soar higher.
Meanwhile, the market remains weighed down by fears of a recession following the energy crisis facing Europe that worsened after Russia cut gas supplies to Germany to 20% of capacity.
The euro stabilized following Tuesday's decline, trading at around 1.0150 against the US dollar.
The pound also rose as the market placed expectations for a 50 basis point interest rate hike by the Bank of England (BOE) in August.
On the other hand, the Aussie dollar also returned to record gains amid increasing price pressure. Australian inflation hit a new record in the second quarter of 2022, rising to 6.1%.
