The U.S. dollar remained under pressure on Wednesday, trading near multi-month lows as benchmark Treasury yields eased from recent peaks ahead of the release of the Federal Reserve’s latest meeting minutes.
The dollar index, which tracks the greenback against six major peers, was marginally lower at 99.65, holding near levels last seen in late June. The euro edged up to $1.1577, approaching a two-month high, while the British pound held steady at $1.3533, close to a three-month peak. The Japanese yen was little changed at 159.56 per dollar, having retreated from a multi-decade low of around 164.
U.S. Treasury yields extended declines, with the benchmark 10-year note falling to 4.702% and the 30-year bond dropping to 5.282%. The retreat in yields reflected a softer economic outlook, with recent data pointing to unexpected job losses in July and milder inflation readings. These developments led investors to scale back expectations for further Federal Reserve rate hikes, weighing on the dollar’s yield advantage.
Market participants were focused on the minutes from the Federal Open Market Committee’s (FOMC) latest policy meeting, due later in the day, for additional clues on the Fed’s rate path. Harvinder Kalirai, chief global fixed income and currency strategist at Alpine Macro, noted that if the Fed does not follow through with the rate hikes currently priced in, the upside for bond yields would be limited. "The labour market and inflation surprise are rolling over and usually that coincides with a narrowing in the dollar's yield advantage, and that feeds through into a softer dollar," Kalirai said.
Geopolitical developments also influenced trading, with oil prices rising to near three-week highs amid a stalemate in the Middle East. U.S. President Donald Trump stated on Tuesday that there were no negotiations with Iran and asserted that the Strait of Hormuz remained open to shipping, contradicting Iran’s claim that the waterway was closed. The conflicting statements added to concerns over supply disruptions in a key oil transit route.
Elsewhere, the New Zealand dollar traded at $0.5874, while the Australian dollar was at $0.7083, reflecting a broadly weaker greenback environment across major currencies.
