The euro remained below a two-week high against the dollar as investors braced for the European Central Bank’s first interest rate hike since 2011 and the planned reopening of a Russian gas pipeline key later in the day.

The single currency has also come under pressure from the impending collapse of the Italian government.

Meanwhile, the yen edged lower ahead of the Bank of Japan’s policy decision on Thursday as the central bank was prepared to stick to ultra-easy settings.

The euro edged up 0.06% to $1.0188, after falling 0.39% overnight from an intraday peak of $1.0273, the highest since July 6.

The euro saw three sessions of strong gains this week on expectations that the ECB could make a big 50 basis point rate hike and a Reuters report that a key Russian gas pipeline would reopen in time after a 10-day maintenance shutdown.

The European Union on Wednesday asked member states to reduce their gas consumption by 15% until March as an emergency measure after President Vladimir Putin warned that Russian supplies sent via the largest pipeline to the Europe could be further reduced and could even stop.

Markets are split on whether ECB policymakers will offer a previously telegraphed 25 basis point hike or a half-point hike in an attempt to tackle runaway inflation. The monetary authority is also likely to provide more details on a new tool aimed at controlling outsized rises in bond yields on Europe’s periphery.

National Australia Bank sees the meeting having mixed implications for the euro.

“Italy’s political uncertainty complicates the ECB’s plans to provide details on its new anti-fragmentation tool, particularly regarding the conditions for triggering the tool”, and a lack of clarity risks dwell on the euro, wrote NAB currency strategist Rodrigo Catril. in a customer note.

Meanwhile, NAB expects a half-point hike and forecasts for another half-point hike in September “with the Bank aiming to price in rate hikes ahead of weaker conditions more later in 2022 and in 2023, when the room for maneuver could be more limited,” said Catril.

In Japan, the BOJ is widely expected to continue bucking the global trend of monetary tightening by keeping stimulus parameters stable, as Governor Haruhiko Kuroda repeatedly telegraphed ahead of the meeting.

The dollar rose 0.07% to 138.345 yen, returning to the 24-year high of 139.38 seen a week ago.

The pound continued to consolidate below $1.20 as the number of candidates vying to be Britain’s next prime minister narrowed to two, but a winner is not expected to be announced until September 5.

The Australian dollar was little changed at $0.6889, while the New Zealand dollar slipped 0.16% to $0.6220.