The US Dollar hovered near multi-month lows against major currencies on Wednesday as Treasury yields pulled back from recent peaks, while investors awaited the Federal Reserve’s latest meeting minutes for fresh signals on the future direction of interest rates.
The Euro edged 0.1% higher to $1.1585, staying close to the two-month high reached earlier this week.
Sterling also gained slightly to $1.3538, remaining near a three-month peak ahead of UK inflation figures due later on Wednesday, with markets expecting the data to point to continued price pressures.
The Japanese Yen edged up to 159.32 per Dollar, moving further away from the closely watched 160 mark after surrendering much of the gains made following Japan’s intervention.
The Dollar index, which tracks the US currency against six major counterparts, slipped 0.1% to 99.55.
The sell-off in US Treasuries appeared to lose momentum, with a relatively quiet economic calendar and few clear catalysts driving markets this week. The benchmark 10-year Treasury yield extended its decline to 4.686%, while the 30-year yield eased to 5.268%, retreating from a near 20-year high.
Investors are now turning their attention to the Federal Reserve’s minutes from its latest policy meeting, due later on Wednesday, for fresh clues about policymakers’ views on the future path of interest rates.
Economic data released over the past few weeks has pointed to a cooling US economy, including an unexpected decline in jobs in July and relatively subdued inflation figures. The softer data has prompted investors to reduce expectations for further interest-rate hikes.
If the Federal Reserve fails to deliver the rate hikes currently priced into markets, there may be little room for bond yields to move higher from here, Reuters reports.
A cooling labour market and softer-than-expected inflation typically lead to a narrowing of the Dollar’s yield advantage, which in turn can put further downward pressure on the US currency.
Meanwhile, a deadlock in the Middle East pushed oil prices to almost three-week highs, keeping concerns about renewed inflationary pressure firmly in focus. US President Donald Trump said on Tuesday that no talks were planned with Iran and maintained that the Strait of Hormuz was open, contradicting Tehran’s claim that the key shipping route remained closed to vessels.
Elsewhere, the Canadian Dollar edged higher to $1.3880 after Trump delayed plans to impose a 50% tariff on Canadian goods for three days, saying the two countries had reached an agreement.
The Australian Dollar slipped 0.2% to $0.7069 as a broad sell-off in global equities weighed on risk-sensitive currencies, whereas the New Zealand Dollar was broadly unchanged at $0.5874.