By Carla Mozee, MarketWatch

Fed statement due at 2 p.m. Eastern

The U.S. dollar slipped against major rivals Wednesday before investors hear the Federal Reserve's statement on interest rates and its massive bond-buying program, while the pound made a notable drive higher after British retail sales figures blew past expectations.

The ICE U.S. Dollar Index , which measures the greenback against six of its rivals, shed 0.2% to 91.681, on course for a second session of losses.

The dollar's direction on Wednesday will be largely in the hands of the Fed, whose policy statement is due at 7 p.m. London time, or 2 p.m. Eastern Time. Chairwoman Janet Yellen will hold a press conference at 2:30 p.m. Eastern Time.

But the greenback did see action against the pound ahead of the Fed statement, as traders pushed sterling to an intraday high of $1.3608, around the highest level since the U.K.'s June 2016 Brexit referendum.

The pound zoomed above $1.3600 after U.K. retail sales in August grew 1% month-over-month, well above the 0.2% rise (http://www.marketwatch.com/story/uk-retail-sales-rise-faster-than-expected-2017-09-20) in a FactSet consensus estimate. But sterling didn't hold above that level for long, moving back to $1.3556.

"Sterling has found a reason to move on the back of the news, having been directionless over the week so far. With non-food price inflation hitting multi-year highs, there is certainly plenty of rationale for [Bank of England Governor] Mark Carney to begin a gradual hiking process, but the limited reaction from sterling show that the market is still rather cautious," said IG chief market analyst Chris Beauchamp in a note.

Sterling late Tuesday fetched $1.3511.

Fed on deck: The Fed is widely expected to say it will start reducing its $4.5 trillion portfolio of government securities. An interest-rate hike isn't expected at the end of the central bank's two-day meeting, and investors see a 56% chance the Fed will raise rates in December (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html/), according to CME Group.

"The dollar would likely rally if the Fed were to reiterate the median expectation of another rate hike this year and three in 2018," said Guy Stear, head of emerging markets strategy at Société Générale, in an note.

"Balance sheet reduction on the other hand is broadly expected. Given robust risk sentiment, a hawkish Fed surprise is likely to incite a sharp bound in the USD/JPY, which remains tied to the twists and turns of U.S. interest rates," he said.

The dollar was down against the Japanese yen , trading at Yen111.28 compared with Yen111.60 late Tuesday in New York.

The euro traded at $1.2014, up from $1.1994 on Tuesday. The greenback also lost ground against the Canadian dollar , buying C$1.2239 versus C$1.2295 in the previous session.

See:Fed to take historic leap into the unknown (http://www.marketwatch.com/story/fed-to-take-historic-leap-into-the-unknown-2017-09-14)

Also read:Why the bond market isn't freaking out about the Fed's shift to quantitative tightening (http://www.marketwatch.com/story/why-the-bond-market-isnt-freaking-out-from-the-feds-shift-to-quantitative-tightening-2017-09-14)

(END) Dow Jones Newswires

September 20, 2017 05:59 ET (09:59 GMT)