The dollar drifts as the Fed kicks off its two-day meeting

The dollar is hovering as the Federal Reserve begins its two-day meeting.

The US dollar index was little changed at 91.99 at 8:17 a.m. ET.

Expectations for an interest rate hike at the meeting, which concludes on Wednesday, are almost zero as the Fed is expected to announce its plan for unwinding its massive balance sheet.

"While we're not expecting any surprises out of the meeting - in terms of another rate hike for example - we should learn a lot about how the Fed plans to tighten monetary policy going forward and that will determine how US yields and the dollar respond," said Craig Erlam, senior market analysts at OANDA, in emailed comments.

"With so much unknown at this stage, it's not surprising why traders are cautious, especially as we're yet to see any real response to the Fed's plans [to cut] its almost $4.5 trillion balance sheet."

Looking forward, there's a 49.8% chance the Fed hikes by the end of the year, up from 35.2% last week, according to Bloomberg data.

The US dollar index has fallen by about 11% since US President Donald Trump's inauguration.

In other FX news, here was the scoreboard at 8:31 a.m. ET:

• The euro was stronger by 0.2% at 1.976 against the dollar after Germany's ZEW Indicator of Economic Sentiment climbed 7 points to 17 in September. Worries about the euro's recent strength had "faded into the background," according to ZEW's president professor Achim Wambach.
• The Canadian dollar was up by 0.2% at 1.2273 per dollar after data showed manufacturing sales fell by 2.6% month-over-month in July, following the prior month's dip of 1.9%.
• The British pound was higher by 0.2% at 1.3528 against the dollar.
• The Japanese yen was little changed at 111.53 per dollar.
• The Indian rupee was down by 0.2% at 64.341 per dollar.