• Odds for rate reduction by mid-year decline in Australia
  • Traders on watch for Fed reaction to recent market turmoil

The Australian dollar rose against all its major peers after a report showed inflation accelerated, while a gauge of the U.S. currency halted its biggest slide in 2 1/2 weeks before a Federal Reserve decision.

The Aussie climbed for a second day against the greenback as data released Wednesday led traders to reduce bets that the Reserve Bank of Australia will lower benchmark borrowing costs by mid-year. The Bloomberg Dollar Spot Index ended a two-day drop, with the Fed set Wednesday to release its first policy statement since it raised rates from near zero last month as traders weigh whether a global stocks rout will have an impact on the central bank’s view.

“The Aussie jumped because of the slightly stronger headline CPI and some removal of near-term rate-cut risk,” said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney.

Australia’s currency added 0.4 percent to 70.30 U.S. cents as of 12:03 p.m. in Tokyo from Tuesday. It touched a nearly seven-year low of 68.27 cents on Jan. 15. Bloomberg’s dollar index was little changed at 1,248.35 after falling 0.4 percent Tuesday, the biggest decline since Jan. 7.

RBA Bets

Australia’s consumer prices advanced 0.4 percent in the final three months of 2015 from the previous quarter and 1.7 percent from a year earlier, beating analysts’ estimates for both readings.

There is a 61 percent chance that policy makers will reduce the record-low 2 percent cash rate by mid-year, down from 67 percent odds Tuesday, swaps trading indicates.

The greenback climbed Wednesday against a majority of its Group of 10 peers.

Fed Chair Janet Yellen and her colleagues on the Federal Open Market Committee are expected to leave the target range for the federal funds rate at 0.25 percent to 0.5 percent when they conclude a two-day meeting in Washington. They voted last month to raise the benchmark rate for the first time since 2006.

“If the Fed sounds too dovish a chord, they’ll lose the option to raise rates in March,” said Masato Yanagiya, head of foreign-exchange and money trading at Sumitomo Mitsui Banking Corp. in New York. “If the Fed isn’t so dovish, it’s likely U.S. yields will rise, and the dollar will strengthen.”

This article originally appeared at Bloomberg.