NEW YORK - The dollar rose modestly against a basket of major currencies on Wednesday as investors braced for the latest policy announcement from the U.S. Federal Reserve in which the central bank is widely expected to hike interest rates by 75 basis points.

The greenback was weaker earlier in the session but had slowly gained ground to move into positive territory on the day.

Expectations for a 75 basis point rate hike stand at about 87% percent, according tp Refinitiv data, with a roughly 13% chance for an even bigger 100 basis point hike. The central bank is expected to bring the rate up to as high as 3.4% by the end of the year as it attempts to bring inflation under control.

Comments from Fed Chair Jerome Powell will be closely monitored to gauge if the Fed will maintain an aggressive policy stance in the face of weakening economic data.

"There is sort of a mood shift going on out there with respect as to whether we will see that pivot or even hints of a dovish pivot here," said Karl Schamotta, chief market strategist at business payments company Corpay, in Toronto.

"At this point they have a danger of a self-reinforcing loop, if Powell hints that the Fed is poised to pivot at some point, that would drive long term interest rates lower, that would essentially take away from what they are trying to do with this front loaded rate cycle."

The dollar index rose 0.168% at 107.310, with the euro down 0.05% to $1.0109.

Bets on oversized rate hikes helped push the dollar index to a two-decade high earlier this month at 109.29, but the greenback has softened lately as economic data has hinted at a possible recession.

But on Thursday, data showed the U.S. trade deficit narrowed sharply in June as exports jumped, while orders for non-defense capital goods excluding aircraft, seen as a proxy for business spending plans, rose 0.5% last month, potentially soothing some concerns about the economy.

The euro recouped some of the prior session's decline, which was the biggest one-day percentage drop for the currency in two weeks, but fears of a European recession remain high as Russia further slowed gas supplies to Europe through the Nord Stream 1 pipeline.

The gas crisis, along with political woes in Italy, will push the region into a mild recession by early next year and limit the European Central Bank's (ECB) path of interest rate hikes, analysts at JPMorgan said.

The Japanese yen weakened 0.16% versus the greenback at 137.16 per dollar, while Sterling was last trading at $1.2024, down 0.01% on the day.

In cryptocurrencies, bitcoin last rose 2.17% to $21,432.51.

(Reporting by Chuck Mikolajczak; Editing by Angus MacSwan)