The dollar shed some of its overnight gains against the yen on Wednesday, as investors made last-minute tweaks to positions ahead of a policy meeting expected to initiate a U.S. easing cycle.

The Federal Reserve is expected to make its first interest rate cut in more than four years at 1800 GMT, with markets pricing a 61% probability of a 50 basis point cut.

The dollar has fallen along with U.S. yields since July and at $1.1129 per euro is not far from the year's low at $1.1201 in anticipation of U.S. easing at a clip, with more than 100 basis points of rate cuts priced in by Christmas.

The yen, up more than 12% since July, has been surging because the Bank of Japan - which sets policy on Friday - has been hiking rates at the same time as the Fed prepares to cut.

It rose about 0.4% to 141.80 per dollar on Wednesday, recouping about a third of an overnight drop. The yen was down 0.3% to 157.84 per euro .

Elsewhere, the Australian dollar traded at a two-week top at $0.6778, while a rise in milk prices supported the New Zealand dollar at $0.62155, though moves were tentative ahead of the Fed's meeting.

Source: Reuters