Dollar drifts near multi-month lows as Treasury yields ease; Fed minutes awaited
HONG KONG: The US dollar drifted near multi-month lows against major peers on Wednesday as Treasury yields eased from recent highs, with investors awaiting minutes of the Federal Reserve’s latest policy meeting for clues on the path of interest rates. The euro inched higher to $1.1577, remaining close to the two-month high touched earlier this week. Sterling was little changed at $1.3533, holding…
The US dollar edged close to multi-month lows against major currencies on Wednesday, as Treasury yields retreated from recent peaks, with traders eyeing minutes from the Federal Reserve's latest policy meeting for any hints on the direction of interest rates. The euro gained slightly to $1.1577, hovering near a two-month peak achieved earlier in the week.
The British pound showed little movement at $1.3533, hovering close to a three-month high, pending British inflation data expected later in the day, which is anticipated to indicate ongoing price pressures. The Japanese yen remained steady at 159.56 per dollar, having relinquished most of its gains from recent intervention efforts, yet it remains far from a multi-decade low around 164.
The dollar index, which gauges the US currency against six key counterparts, slipped marginally to 99.65. A recent spate of US Treasury sell-off seemed to have tapered off, amid a week with sparse economic data and other prominent drivers. The yield on the benchmark 10-year Treasury note declined further to 4.702%, while the 30-year bond yield dropped to 5.282%.
Market participants are now focused on the Federal Reserve's upcoming release of minutes from their most recent meeting, seeking insights into policymakers' perspectives on interest rate policy. Recent economic data have signaled a softening U.S. economy, including an unexpected drop in jobs in July and tame inflation readings, prompting investors to reduce rate-hike expectations.
"If the Fed does not follow through with the rate hikes that are already priced in, the upside for bond yields should be quite limited," said Harvinder Kalirai, chief global fixed income and currency strategist at Alpine Macro, during a client webinar. "The labor market and surprise in inflation are waning, and that typically aligns with a narrowing in the dollar's yield advantage, which subsequently impacts the dollar's strength."
Amidst a Middle East impasse, oil prices surged to near three-week highs, sustaining inflationary pressures. US President Donald Trump confirmed on Tuesday that there were no discussions with Iran and affirmed that the Strait of Hormuz remained open to shipping, contradicting Iran's claim that the waterway was still closed to vessels.
The New Zealand dollar and Australian dollar held steady, trading at $0.5874 and $0.7083, respectively.
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