Investing.com - The euro edged higher against the dollar on Wednesday as investors turned their attention to the outcome of the Federal Reserve’s meeting later in the day while fears that the U.K. may vote to exit the European Union continued to roil markets.
EUR/USD hit highs of 1.1229, up from Tuesday’s one-and-a-half week lows of 1.1188.
The Fed was to conclude its two-day policy meeting later on Wednesday and investors were looking for fresh indications on whether the U.S. central bank still expects to raise interest rates twice this year.
The euro fell sharply against the dollar on Tuesday after German Bund yields turned negative for the first time after a number of opinion polls showed that Britain’s EU referendum race is tightening ahead of the June 23 vote.
Investors fear that a Brexit could trigger a period of uncertainty in financial markets and tip the EU into a recession.
The dollar pushed higher against the yen, with USD/JPY rising 0.16% to 106.28, pulling away from Tuesday’s six-week lows against the dollar.
The euro also gained ground against the yen, with EUR/JPY up 0.24% to 119.21, after falling to a three-year trough of 118.50 on Tuesday.
The yen, which investors tend to buy in times of uncertainty, has strengthened in recent sessions as Brexit fears sent investors scrambling into safe haven assets.
On Wednesday, Japan said it would continue to closely monitor how financial markets react to the possibility of a Brexit.
The European Central Bank on Tuesday pledged to backstop financial markets in conjunction with the Bank of England in the event of a vote to exit the EU.
Providing extra liquidity would reduce pressure on banks and help calm financial markets after the vote.
Sterling moved higher against the dollar, with GBP/USD advancing 0.4% to 1.4170.
The pound strengthened against the yen, with GBP/JPY up 0.58% at 150.62, pulling away from Tuesday’s three year lows of 149.17.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, dipped 0.09% to 94.94.