TOKYO (Reuters) - The dollar hovered below a one-month high compared with major peers on Tuesday ahead of a much-anticipated Federal Reserve meeting that could signal a change in the outlook for U.S. monetary policy. The U.S. currency has been buoyed as traders closed short positions before the Fed’s two-day policy-setting confab, which kicks off on Tuesday. The dollar index, which measures the greenback against a basket of six currencies, was flat early in Asia at 90.517. It has pushed briefly above 90.60 in each of the last two sessions, and 90.63 would be the strongest level since May 14. Traders will be watching carefully for clues on when policymakers will start tapering dollar-depreciating stimulus. So far Fed officials, led by Chair Jerome Powell, have stressed that rising inflationary pressures are transitory and ultra-easy monetary settings will stay in place for some time to come, although recent economic data has raised concerns that price pressure after the post-COVID-19 economic reopening could force an earlier stimulus withdrawal. “While Powell will tread carefully, I expect that the Fed is warming to a more open discussion about tapering, to be formally announced in the September meeting,” Chris Weston, head of research at broker Pepperstone in Melbourne, wrote in a note to clients. “Any view that cements a formal announcement in September should be modestly USD bullish, but the risks are symmetrical as Powell will be keen to not hurt financial conditions,” he wrote. Nearly 60% of economists in a Reuters poll expect a tapering announcement in the next quarter, despite a patchy recovery in the job market. Currency markets settled in tight ranges with implied volatility plumbing multi-month lows after last week’s strong inflation readings and a dovish European Central Bank meeting failed to dislodge currencies from recent trading levels. The Deutsche Bank FX Volatility Index plunged to 5.6 on Friday, its lowest in nearly 16 months, and remained just above that level this week. The euro was little changed at $1.21185 on Tuesday, near an almost one-month low at $1.20930 reached on Friday. The yen was at 110.075 per dollar, almost flat from Monday, after a more than 0.3% slide in each of the past two sessions. In cryptocurrencies, bitcoin traded above $41,000 for the first time in more than two weeks on Monday, and was last around $40,495 after rallying from below $35,000 on Sunday after Tesla Inc boss Elon Musk tweeted that the electric carmarker would resume allowing bitcoin transactions when miners who verify transactions use more renewable energy. Ether also got a small lift in sympathy with its bigger rival, but remained well within recent ranges at $2,605.54 on Tuesday. ======================================================== Currency bid prices at 020 GMT Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar $1.2118 $1.2121 -0.02% -0.82% +1.2123 +1.2114 Dollar/Yen 110.0700 110.0650 +0.01% +6.57% +110.0800 +110.0600 Euro/Yen 133.38 133.39 -0.01% +5.09% +133.4300 +133.3600 Dollar/Swiss 0.8995 0.8995 +0.02% +1.69% +0.8997 +0.8997 Sterling/Dollar 1.4112 1.4105 +0.05% +3.29% +1.4112 +1.4105 Dollar/Canadian 1.2139 1.2149 -0.04% -4.63% +1.2147 +1.2140 Aussie/Dollar 0.7712 0.7712 +0.01% +0.26% +0.7716 +0.7709 NZ Dollar/Dollar 0.7148 0.7144 +0.02% -0.49% +0.7148 +0.7143 All spots Tokyo spots Europe spots Volatilities Tokyo Forex market info from BOJ Reporting by Kevin Buckland Our Standards: The Thomson Reuters Trust Principles.