The U.S. dollar traded near multi-month lows against major currencies on Wednesday as Treasury yields eased from recent highs. Investors awaited the release of Federal Open Market Committee minutes for clues about future policy.
Dollar weakens as yields ease
The dollar index, measuring the currency against six peers, slipped 0.1% to 99.55. The 10-year Treasury yield fell to 4.686%, while the 30-year bond yield dropped to 5.268% after reaching a near 20-year peak earlier in the week.
With few economic reports scheduled, markets lacked clear direction. The pause in Treasury selling provided little support for the dollar, which has struggled since data pointed to a slowing U.S. economy.
Currency markets respond to inflation and Fed outlook
The euro rose 0.1% to $1.1585, remaining close to a two-month high. Sterling climbed to $1.3538, near a three-month peak ahead of British inflation figures. The data may show persistent price pressures, potentially shaping the Bank of England’s next decision.
The Japanese yen strengthened slightly to 159.32 per dollar, moving away from the 160 mark that had raised concerns about possible intervention by Japanese officials. Recent tensions in global markets had erased much of the yen’s earlier gains following suspected intervention in late July.
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The Canadian dollar advanced to $1.3880 after U.S. President Donald Trump announced a temporary halt to a planned 50% tariff on Canadian goods, citing progress in trade talks. Meanwhile, the Australian dollar declined 0.2% to $0.7069 as risk appetite faded amid a global stock market decline.
The Fed minutes, set for release later Wednesday, will be examined for signals about the central bank’s next steps. Recent economic reports, including weaker-than-expected July job growth and softer inflation numbers, have led investors to reduce bets on additional rate increases. A more cautious tone in the minutes could push yields lower, reducing the dollar’s appeal.
Harvinder Kalirai, chief global fixed income and currency strategist at Alpine Macro, told clients that labor market and inflation surprises were easing. “This typically leads to a smaller yield advantage for the dollar, which then weakens,” he said.
Geopolitical tensions weigh on sentiment
Oil prices climbed to near three-week highs as Middle East negotiations remained deadlocked. Trump stated Tuesday that no talks with Iran were underway and insisted the Strait of Hormuz stayed open, despite Iran’s claim that the waterway was closed to shipping. The uncertainty kept inflation worries alive, though its effect on currency markets stayed limited.
The New Zealand dollar held at $0.5874, showing little response to the broader risk-off mood. With few key economic releases ahead, traders appeared reluctant to make significant moves before the Fed’s minutes.
