Dollar index up 2.2% this month; +0.2% in Asia session Yen eyes...

	  Dollar index up 2.2% this month; +0.2% in Asia session 

	  Yen eyes 4.5% monthly drop 

	  Fed focus on likelihood of March cut 

(Updates prices)

The dollar headed for its biggest monthly gain since September and the yen for its sharpest drop in over a year on Wednesday, as traders waited on a U.S. rates decision to round out January.

A sharp slowdown in Australian inflation pushed the Aussie dollar AUD=D3 down 0.5% to $0.6567 and rallied bonds as investors pulled forward wagers on interest rate cuts.

Elsewhere moves were more modest, and the yen JPY=EBS made little immediate reaction to a hawkish tilt at the Bank of Japan, while markets waited to hear from the Federal Reserve.

The dollar was slightly firmer at $1.0817 per euro EUR=EBS and steady at 147.67 yen JPY=EBS early in the Asia afternoon.

The dollar has gained 2.2% against a basket of major currencies this month =USD as markets dialled back expectations on the speed and scale of rate cuts in the face of strong U.S. economic data and pushback from central bankers.

The yen is down more than 4.5% on the dollar this month and headed for its largest monthly drop since June 2022 as tepid wage data and cooling inflation leave room for the Bank of Japan to take its time raising rates. However, a summary of its January meeting on Wednesday showed its resolve strengthening and conditions supporting an end to negative rates relatively soon.

The dollar index =USD was last up 0.2% to 103.60. Sterling GBP=D3 dipped 0.2% to $1.2675.

The Federal Reserve is expected to hold U.S. interest rates steady but flag cuts are coming by dropping language indicating it is weighing further hikes.

Interest rate futures price a roughly 43% chance of a Fed rate cut in March, down from 73% at the start of the year.

"The market reaction to the (Fed) meeting and its spillover onto most asset markets is likely to be largely captured by the impact on the probability of a rate cut at the March meeting," said Deutsche Bank's chief international strategist Alan Ruskin.

The pricing tends to influence the euro/dollar rate, he noted, with a 50-50 probability consistent with the euro at $1.087. "A 100% probability of a rate cut would point to euro/dollar at $1.1080, while a rate cut that is fully ruled out for March would point the way to euro/dollar at $1.0660," he said.

Ahead of the Fed, French and German inflation figures are expected. Slowdowns there would foreshadow the same in Eurozone numbers due on Thursday and reinforce market expectations that European policymakers could start rate cuts as soon as April.

Expectations of interest rate cuts in China have driven a strong rally in the bond market this month while the yuan has been squeezed by flight from China's crumbling equity markets.

The Chinese currency CNY=CFXS held at 7.1817 on Wednesday, down 1% for the month. China's manufacturing activity in January contracted for a fourth straight month, an official survey showed, suggesting the sprawling sector was struggling for momentum.

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	Currency bid prices at 0547 GMT 

 Description	  RIC		 Last		   U.S. Close  Pct Change	 YTD Pct	 High Bid	Low Bid 
											  Previous				   Change				  
											  Session											
 Euro/Dollar	   EUR=EBS																	   

							  $1.0820		 $1.0845	-0.23%		  +0.00%	  +1.0847	 +1.0816 
																								 
 Dollar/Yen		JPY=EBS																	   

							  147.7300		147.6100   +0.03%		  +0.00%	  +147.8150   +147.2050 
																								 
 Euro/Yen		 
				  S>		  159.84		  160.07	 -0.14%		  +0.00%	  +160.0700   +159.6500 
																								 
 Dollar/Swiss	  CHF=EBS																	   

							  0.8631		  0.8619	 +0.15%		  +0.00%	  +0.8636	 +0.8617 
																								 
 Sterling/Dollar   GBP=D3																		

							  1.2677		  1.2701	 -0.19%		  +0.00%	  +1.2700	 +1.2674 
																								 
 Dollar/Canadian   CAD=D3																		

							  1.3419		  1.3398	 +0.15%		  +0.00%	  +1.3424	 +1.3395 
																								 
 Aussie/Dollar	 AUD=D3																		

							  0.6564		  0.6603	 -0.58%		  +0.00%	  +0.6603	 +0.6560 
																								 
 NZ				NZD=D3																		

 Dollar/Dollar				0.6111		  0.6136	 -0.39%		  +0.00%	  +0.6136	 +0.6112 
																								 
																								 
	 
All spots  FX=  
Tokyo spots  AFX=  Europe spots  EFX=   Volatilities  FXVOL=   Tokyo Forex market info from BOJ  TKYFX  
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World FX rates	https://tmsnrt.rs/2RBWI5E 

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