The U.S. dollar clung to small gains on Tuesday as caution reigned in currency markets ahead of major central bank meetings.

The meeting begins with a two-day Federal Reserve gathering due to start later in the global day.

The greenback hovered just off its highest since June versus the yen and cemented a position around $1.19 per euro in muted trading.

The firmer tone for the dollar came despite a retreat in U.S. benchmark yields from the highest levels in more than a year ahead of the Fed meeting.

Expectations are running low for monetary policymakers to shift from their accommodative stance.

This is despite forecasts of rapid economic growth in the wake of an accelerating COVID-19 vaccine roll-out and a $1.9 trillion pandemic relief package.

Investors will pore over whatever the Fed has to say about the run-up in yields, which have risen on bets that economic growth and inflation could prompt a faster-than-expected normalisation of monetary policy.

“It’s a very pivotal meeting from that perspective,’’ said Mayank Mishra, an FX strategist at Standard Chartered Bank in Singapore.

“The other thing that is being awaited is any decision on the supplemental leverage ratio (SLR) exemption.

“We don’t expect any explicit push back on back-end yields, but an extension of the SLR can offer some relief to the market.’’

The SLR exemption, a regulatory break that allows big banks to exclude reserve deposits and Treasuries from capital ratios, is due to expire on March 31.

The dollar was little changed at 109.170 yen after rising to a nine-month high of 109.365 on Monday.

The Bank of Japan begins a two-day policy meeting on Thursday, along with an extensive policy review.

The euro was largely flat at $1.19330, languishing below $1.20 since March 5.

Europe’s vaccine roll-out has been hampered by the suspension of AstraZeneca shots in Germany, France, and other nations amid concerns about possible serious side effects.

Sterling fell about 0.2 percent to $1.3871 ahead of a Bank of England meeting on Thursday, where the central bank is expected to keep its benchmark interest rate at its historic low of 0.1 percent and its bond-buying programme unchanged.

The dollar’s index against six major currencies was flat at 91.798 after rising nearly 0.2 percent on Monday.

The Australian dollar viewed widely as a liquid proxy for risk appetite, and the New Zealand dollar were little changed against the U.S. dollar.

The commodity-linked currencies are on course to post their fourth straight quarterly gain as commodity prices rebound on bets of economic growth.

Bitcoin, meanwhile, slipped to $54,198.64 following its jump to a record $61,781.83 on Saturday.

(Reuters/NAN)