The dollar gained ground on Wednesday (1 February), rebounding from a two-month low as investors hoped the US Federal Reserve will adopt a hawkish stance at its policing meeting tonight.

Overnight, the greenback fell to ¥112.08, its lowest level since late November against the yen, after Peter Navarro, the head of Donald Trump's new National Trade Council, claimed Japan, Germany and China were reaping the benefits of using "grossly undervalued" currencies to exploit the US.

The decline capped a torrid month for the US currency, as the dollar index – which measures the strength of the greenback against a basket of worldwide currencies –fell 2.6% in January, the worst performance for the first month of the year since 1987.

However, by early afternoon on Wednesday (1 February), the greenback had recouped part of the losses and was trading higher against most of its main rivals.

Fat against the euro and the Swiss franc, the dollar was 0.44% higher against the yen, trading at ¥113.30, and gained 0.15% against the Canadian dollar, exchanging hands at CAD$1.3049.

The US central bank will hold its first post-election meeting tonight and given the lingering uncertainty over Donald Trump's economic policies, analysts to not expect any major surprises.

"Investors will be left to pour over the statement that it released alongside the decision to see whether views have changed on the path of interest rates this year since the last meeting," said Oanda's senior market analyst Craig Erlam.

"Given that the Fed is none-the-wiser when it comes to Trump's spending and tax plans, I would imagine the views of policy makers will be unchanged since the middle of December and they will reiterate an intention to hike three times."

Joel Kruger, FX strategist at LMAX Exchange, added: "The Fed has laid out its plan for 2017 but won't be pressured to rock the boat today. While we could see minor tweaks in the language, the central bank is likely to shy away from making any adjustments that would have the market reconsidering its March bets."

Meanwhile, the pound gained ground, climbing 0.53% against the euro to €1.1707 and 0.43% against the dollar, trading at $1.2631, close to the current 2017 high of $1.2673.

Sterling's gains were fuelled by a positive report on the state of the manufacturing industry, which showed the sector PMI slipped only marginally to 55.9 from December's two-and-a-half-year high of 56.1.

However, the report also highlighted the effects of the weaker pound were beginning to be felt across the sector, with input cost inflation spiking to the highest seen since data were first collected in 1992.