The dollar held just below a 20-year high against a basket of currencies on Monday before an expected Federal Reserve rate hike this week, with traders focused on the potential for the U.S. central bank to adopt an even more hawkish tone than many expect.

The Fed has taken an increasingly aggressive approach to monetary policy as it tackles inflation that is soaring at its fastest pace in 40 years. It is expected to hike rates by 50 basis points and announce plans to reduce its $9 trillion balance sheet when it concludes its two-day meeting on Wednesday.

Though the chances are seen as low, some investors are watching for the possibility of a 75 basis point hike, or a faster pace of balance sheet reduction than currently expected.(Reuters).