U.S. Dollar Falls Ahead Of Fed Decision

The U.S. dollar weakened against its key counterparts in early European deals on Wednesday, as investors became cautious ahead of the outcome of Federal Reserve's policy meeting that would shed more clues about the probability of a rate increase in December.

The Federal Reserve will publish its rate decision at 2:00 pm ET, with economists widely expecting the federal funds rate to be kept on hold at a range of 1 percent to 1.25 percent.

The Fed will also release its latest Summary of Economic Projections, followed by a press conference from the Fed Chair Janet Yellen at 2:30 pm ET.

The central bank is expected to announce the start of a gradual reduction of the $4.5 trillion balance sheet, which it amassed through purchases of U.S. Treasury debts and mortgage-backed securities during the financial crisis.

Market participants also await the Fed's plan regarding the future key interest rate path in the wake of slowing pace of inflation.

Geopolitical tensions resurfaced after U.S. President Donald Trump warned that he would totally destroy North Korea if it attacks the United States or its allies and labeled North Korean leader Kim Jong-un as a "Rocket Man" on a suicide mission.

"The United States has great strength and patience, but if it is forced to defend itself and its allies, we will have no choice but to totally destroy North Korea," Trump said in a speech to United Nations on Tuesday.

The currency has been trading in a negative territory in the Asian session.

The greenback dropped to 111.33 against the Japanese yen, coming off from a high of 111.65 hit at 8:45 pm ET. If the greenback-yen pair falls further, 109.00 is possibly seen as its next support level.

Data from the Ministry of Finance showed that Japan posted a merchandise trade surplus of 113.642 billion yen in August.

That beat forecasts for a surplus of 104.4 billion yen, although it was down from 418.8 billion yen in July.

Resuming early slide, the greenback slipped to a session's low of 0.9595 against the Swiss franc. The greenback is likely to challenge support around the 0.94 region.

The greenback slipped to a 2-day low of 1.3607 against the pound, after having advanced to 1.3493 at 5:00 pm ET. Continuation of the greenback's downtrend may see it challenging support around the 1.38 area.

The greenback held steady against the euro in the European session, following a 9-day decline to 1.2020 at 9:45 pm ET. The pair finished Tuesday's deals at 1.1994.

Data from Destatis showed that Germany's producer prices increased at the fastest pace in three months in August.

Producer prices increased 2.6 percent year-on-year in August, faster than the 2.3 percent rise seen in July.

The greenback weakened to an 8-day low of 0.8048 against the aussie and a 1-1/2-month low of 0.7375 against the kiwi, off its early highs of 0.7999 and 0.7303, respectively. On the downside, 0.83 and 0.75 are possibly seen as the next support levels for the greenback against the aussie and the kiwi, respectively.

The greenback reversed from an early high of 1.2302 against the loonie, edging lower to 1.2267. Further weakness may take the greenback to a support around the 1.21 region.

Looking ahead, U.S. existing home sales data for August and crude oil inventories data are slated for release in the New York session.