Dollar on back foot as US yields, crude prices dip; Aussie buoyed by hawkish RBA

The US dollar faced a downturn on Wednesday, dropping to a three-week low, following a decline in Treasury yields and crude oil prices, which diminished its allure as an investment option. Meanwhile, the Australian dollar approached a three-week high against the US dollar, with the Reserve Bank of Australia's Deputy Governor Andrew Hauser expressing uncertainty about the central bank's need for further rate hikes next month due to deteriorating inflation prospects.

The Australian dollar climbed 0.1% to $0.7013, just below its previous day's peak of $0.7017. The US dollar index, representing the currency's value against six counterparts, remained stable at 101.78 after a 0.2% drop on Tuesday. Despite the dollar's retreat, investors continue to favor it as a haven amid ongoing geopolitical tensions and the AI boom, partly due to the US currency's energy independence.

However, the dollar's appeal may wane once the Middle East conflict concludes and energy prices stabilize. The greenback stood at 158.33 yen, remained steady at $1.1229 per euro, and was unchanged at $1.33735 against the British pound. Traders remained cautious about the euro amid France's escalating anti-government protests and deteriorating fiscal situation.

Central banks, including the US Federal Reserve, European Central Bank, and Bank of Japan, are set to announce policy decisions consecutively beginning next Wednesday, with no anticipated rate changes. The Reserve Bank of New Zealand and Bank of Canada will decide on the same day as the Fed, with traders anticipating quarter-point rate hikes from both. The New Zealand dollar declined 0.1% to $0.5677, while Canada's loonie remained steady at C$1.4064.