On Wednesday, the dollar index fell further from 20-year highs, with the US Federal Reserve expected to hike interest rates by a half-point later in the day and by 250 basis points (bps) by the end of the year.

After experiencing wild gyrations in recent weeks, currency markets have calmed in to await the Fed's announcement and Chairman Jerome Powell's news conference. The dollar has soared to 20-year highs versus a basket of currencies. Markets expect the Federal to hike rates to as high as 3.6 percent by the end of 2023 in order to keep inflation from reaching 40-year highs. The Fed is expected to deliver a 50 basis point raise on Wednesday, after kicking off its hike cycle in March, with two more half-point hikes factored in for the following two sessions.

It could also reveal when it plans to begin decreasing its USD9 trillion balance sheet. Last month, these bets pushed the dollar index up 5% to approximately 103.93. It has now fallen 0.3 percent from those highs, and by 1030 GMT, it was trading at 103.40, down marginally on the day.

The dollar's surge has dragged on other currencies, sending the euro to two-decade lows near USD1.0469 last week. On Wednesday, it was trading at USD1.0525. "The fundamentals, the interest rate differential, the growth prognosis, and the risk-off mindset all point to the dollar," said Gergely Majoros, a member of Carmignac's investment committee.

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