Dollar drifts near multi-month lows as Treasury yields ease

US dollar prices edged closer to multi-month lows on Wednesday, as Treasury yields softened from their recent peaks, according to reports. Investors were eagerly awaiting minutes from the Federal Reserve's latest policy meeting, hoping for insights into future interest rate direction. The euro showed slight resilience, hovering near a two-month high, while the British pound maintained a near three-month peak, both awaiting upcoming inflation data.

The Japanese yen held steady around 159.56 per dollar, having somewhat retraced its intervention-driven gains, yet still far from its multi-decade low of approximately 164. The dollar index, which gauges the US currency's performance against six major counterparts, slipped marginally to 99.65. Treasury yields on the benchmark 10-year note fell to 4.702%, and on the 30-year bond to 5.282%.

Market participants now shifted their focus to the Fed's forthcoming release of minutes from their most recent policy meeting, searching for clues about the central bank's stance on interest rates. Recent economic data, including unexpected job losses in July and subdued inflation readings, suggested a softer US economy, prompting investors to reduce expectations of rate hikes.

If the Fed fails to raise rates as anticipated, bond yields may not rise significantly, benefiting the dollar. The labor market and inflation surprise seemed to be stabilizing, often leading to a decline in the dollar's yield advantage and a weaker currency. Meanwhile, Middle East tensions lifted oil prices to near three-week highs, maintaining inflation risks.

Trump asserted no negotiations with Iran, but Iran insisted the Strait of Hormuz remained closed to shipping. The New Zealand dollar and Australian dollar remained largely unchanged, trading at US$0.5874 and US$0.7083 respectively.