Dollar holds steady, near 14-month highs vs. counterparts. Overview

On Tuesday the dollar kept being stable near 14-month highs against the basket of other major currencies, after the release of tepid U.S. producer price inflation data, while investors awaited the outcome of the Federal Reserve's two-day policy meeting on Wednesday.

Official data showed that U.S. producer price inflation was flat last month, compared to expectations for a 0.1% rise, after a 0.1% gain in July. Core PPI, which excludes food, energy, and trade rose 0.1% in August, in line with expectations, after an increase of 0.2% in July.

Demand for the dollar continued to be firmed by expectations for an early hike in U.S. interest rates.

The Fed was anticipated to cut its asset purchase program by another $10 billion at its upcoming policy meeting on Wednesday, which would keep it on track for winding up the program in October, and to start raising interest rates sometime in mid-2015.

The euro edged up against the dollar, but still remained within close distance of a 14-month low with EUR/USD gaining 0.09% to 1.2952.

The euro shrugged off data showing that the ZEW index of German economic sentiment fell to a 21-month low of 6.9 this month, down from 8.6 in August.

GBP/USD slid 0.21% to 1.6198, as investors eyed the upcoming referendum on Scottish independence, scheduled on Thursday.

USD/JPY was just below six-year highs, slipping 0.10% at 107.07 as the diverging monetary policy stance between the Fed and the Japanese central bank continued to pressure the yen lower.

The yen came under pressure last week after Bank of Japan Governor Haruhiko Kuroda said that the bank would be prepared to immediately loosen monetary policy or implement other measures if its 2% inflation target becomes difficult to meet.

USD/CHF dipped 0.25% but remained close to a one-year high at 0.9330.

AUD/USD was steady at 0.9030. In the minutes of its September policy meeting, the Reserve Bank of Australia reiterated its decision to keep interest rates on hold for an extended period of time and added that the exchange rate remains "above most estimates of its fundamental value."

Meanwhile, NZD/USD slipped 0.13% to 0.8165 and USD/CAD edged down 0.23% to 1.1032. Data showed that in Canada manufacturing sales rose 2.5% in July, exceeding expectations for a 1.1% gain, after a revised 0.9% increase the previous month.