The dollar gained against peers ahead of the potential Fed rate increase.
The dollar strengthened 0.49% to 155.11 against the Japanese yen JPY=. The European single currency EUR=EBS edged down 0.07% against the dollar at $1.1539.
The dollar index =USD, which measures the greenback against a basket of currencies, rose 0.16% to 99.65.
Spot gold XAU= fell 0.06% to $4,295.52 an ounce.
Stocks slip as yields and oil weigh on markets
U.S. Treasury yields hit their highest level since 2007 and oil prices rose on Tuesday, weighing down global stocks, which extended a selloff from the day's previous session.
Yields on benchmark U.S. government debt have marched steadily higher over the past month due to growing concerns among investors about higher inflation and, more broadly, the country's long-term fiscal outlook. Yields in Germany also hit their highest since 2009.
The U.S. Federal Reserve is expected to raise rates by at least a quarter point, even though Fed Chair Kevin Warsh has been reluctant to provide guidance on the future path of rates.
"There should be zero shock factor in the fact that we've had an exuberant economic backdrop, we had earnings growth that just hit 30% last quarter and we have a geopolitical conflict that's driving up commodity prices," said Edison Byzyka, chief investment officer at Credent Wealth Management.
"I think the Fed needs to absolutely raise rates tomorrow. If the Fed does not raise rates by at least a quarter of a (percentage) point, we're going to see the bond market just punish the Treasury market."
All three main indexes on Wall Street finished lower, led by losses in consumer discretionary, communication services and utilities stocks. Energy shares were the biggest gainers.
The Dow Jones Industrial Average .DJI fell 0.63%, the S&P 500 .SPX lost 0.45%, and the Nasdaq Composite .IXIC dropped 0.78%.
Europe's STOXX 600 .STOXX fell 0.28% after hitting its lowest level since June 12.
MSCI's main world stocks index <.MIWD00000PUS> was down 0.5%.
Oil rises above $108 on Middle East supply concerns
Benchmark Brent crude futures settled above $108 per barrel LCOc1 as Yemen's Iran-aligned Houthis launched a new wave of attacks on Saudi Arabia and were digging into positions on the western coast of Yemen along the Red Sea.
Oil prices have also been steadily rising, along with key fuel markets like gasoline and diesel. Energy supplies have been restricted since the U.S. and Israel launched joint strikes against Iran in late February, spurring that nation to blockade the crucial Strait of Hormuz. The recent Houthi attacks have further impaired the flow of energy out of the Middle East.
Treasury and Bund yields move higher ahead of central bank meetings
U.S. 10-year Treasury yields hit peaks not seen since 2007 ahead of the Fed's rate decision on Wednesday. The yield on benchmark U.S. 10-year notes US10YT=RR rose 4.5 basis points to 5%.
German Bund yields DE10YT=RR, the euro area's benchmark, rose to their highest level in over 17 years at 3.56%.
The Bank of Japan is widely expected to raise its interest rate by 25 bps to 1.25% at the end of its two-day meeting on Friday, and signal more tightening ahead. Policymakers are seeking to shore up the yen after intervention helped steer the currency away from a 40-year low.
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