The U.S. currency has been stuck in a trading range as investors wait for clarity on whether the policy-setting Federal Open Market Committee (FOMC) will forecast four rate hikes this year, instead of the median three hikes seen in December's quarterly forecast. With as many as four hikes seen this year, expectations were "chomping at the max" he added.
"The threat of a trade war returns to the top of the list of tail risks most commonly cited by investors, followed by inflation and a slowdown in global growth", he added.
Japan's Nikkei ended down nearly 1 per cent in Asia too as its exporters were hit again by broad-based strength in the yen which was up for a third session in the last four in a lively currency market.
It included a surprise new central bank chief but for the most part was largely as anticipated and is expected to keep the focus on halting riskier types of lending in the giant economy.
Other social media companies also sank: after sharp losses Monday, Twitter plunged $3.63, or 10.4 percent, to $31.35 and Snap lost 42 cents, or 2.6 percent, to $16. While the company announced a bigger profit than analysts expected, they were less impressed once items like lower tax rates and stock repurchases were excluded, and its sales were lower than Wall Street had forecast.
Wall Street look set to lose more ground when NY reopens having seen the Dow lose 1.57 percent last week, the S&P drop 1.04 percent and the Nasdaq 1.27 percent.
The decline was somewhat surprising given figures from Bank of America Merrill Lynch showed a record $43.3-billion of inflows into equities last week, outpacing bond flows for the first time since 2013.
Whether the cash continues to flow could depend on what the Fed decides on Wednesday. They are expected to raise interest rates on Wednesday.
With investors already on edge, Powell will "play things closer to the vest" when he holds court for his first post-meeting press conference, The Sevens Report founder and editor Tom Essaye told FOX Business.
This is particularly likely to be the case at a time when financial conditions are very easy and when the economy is receiving an ill-timed fiscal policy boost at this late stage in the economic cycle. For which reason, one has to hope that the president disregards the advice of those around him, who would like to see him lean on the Fed to refrain from raising its policy interest rate.
While long-term United States bond yields were muted, short-dated yields rose ahead of an expected rate hike from the Fed after its two-day policy meeting starting on Tuesday.
"The worst case is the '18 and '19 dots both move up - the Fed is now guiding to five hikes in '18 and '19 combined but under this scenario that would shift to seven hikes", they warned in a note to clients.
The cautious mood was evident in demand for the safe-haven Japanese yen which was climbing against a raft of currencies, including the euro and Australian dollar. According to Reuters, the White House declined to comment Monday.
"If it goes below 71.75 (US cents), it will go pretty hard toward 70.50".
Benchmark Sensex index rose 0.27%, or 88.33 points, to 33,085.09. The euro gained to $1.2265 from $1.2241.
Gold fell $5.90 to $1,311.90 an ounce.
As the US currency firmed, the euro traded at $1.2261, having fallen 0.78 percent on Tuesday and hitting a near three-week low of $1.2240.
The Canadian dollar and the Mexican peso gained after media reports that the USA administration had dropped a contentious demand related to auto-content, removing a key roadblock to a deal for a new North American free-trade (NAFTA) agreement.
Oil prices edged slightly higher as investors remained wary of growing crude supply although tensions between Saudi Arabia and Iran provided some support.