Dollar Down as Investors Await Fed Minutes
The dollar was down on Wednesday morning in Asia ahead of the U.S. Federal Reserve’s release of the minutes from its latest meeting. The euro, meanwhile, fell to an almost three-month low against the greenback as German economic data disappointed and raised concerns about the country’s economic recovery from COVID-19.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.01% to 92.532 by 11:41 PM ET .
The USD/JPY pair held steady at 110.61.
The AUD/USD pair inched down 0.07% to 0.7491 while the NZD/USD pair inched up 0.06% to 0.7015.
The USD/CNY pair inched down 0.06% to 6.4714 and the GBP/USD pair inched down 0.01% to 1.3798.
The euro traded at $1.1820, after hitting a three-month low of $1.1806 during the previous session. It also fell against the yen to 130.81 yen, close to a two-month low of 130.05 hit on Jun. 21.
Data released on Tuesday said that the German Zentrum für Europäische Wirtschaftsforschung (ZEW) economic sentiment index fell sharply to 63.3, below the 75.2 in forecasts prepared by Investing.com and June’s 79.8 figure.
Separate data also said that German factory orders contracted 3.7% month-on-month in May, against the 1% growth in forecasts prepared by Investing.com and April’s 1.2% growth.
Meanwhile, the ongoing production dispute among the members of the Organization of the Petroleum Exporting Countries and allies (OPEC+) that caused a plunge in prices dampened sentiment for other risk-sensitive currencies.
The Australian dollar also gave up its gains from Tuesday as investors digested the Reserve Bank of Australia (RBA)’s policy decision handed down that day. In its first step towards asset tapering, the RBA announced a smaller, third round of its quantitative easing program and retained the April 2024 bond for its three-year yield target of 0.1%. The interest rate remained unchanged at 0.1%.
In the U.S., yields recently took a tumble after investors who had bet that the Fed would tighten its monetary policy sooner than expected thanks to rising inflation were forced to bail out of their positions.
The minutes from the Fed’s June 2021 meeting, to be released later in the day, are widely expected to offer clues to the central’s bank’s policy outlook moving forward.
However, some investors said that the clues are already there.
“Many people seem to think the Fed will drop hints on tapering in August, and will say in September that it is considered, and it will be implemented in December. But I believe the Fed could move earlier than those timelines,” Sumitomo Mitsui Bank chief strategist Daisuke Uno Said.
“The important point is, the Fed did already raise their inflation forecast,” Uno added.