Dollar Steadies Ahead of Release of Fed Meeting Minutes
U.S. Dollar Stabilizes Near Two-Week Highs
The U.S. dollar remained stable near two-week highs early in European trade on Wednesday as investors awaited the release of the Federal Reserve’s December meeting minutes.
At 04:10 ET (09:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 101.959.
The dollar’s performance on Tuesday marked its best daily performance since March 2023, surging just under 1%.
Dollar Gains and Risk Aversion
The dollar has recently seen a resurgence, supported by a rise in U.S. Treasury yields. The benchmark 10-year yield hit an over two-week high in the previous session.
A sense of risk aversion has caused the and to close lower in their first trading session of 2024. Investors are concerned that the minutes of the Fed’s December meeting, due later Wednesday, may not be as dovish as previously expected.
Analysts at ING noted, “Markets are unwinding some dovish bets, and questioning stretched equity valuations, ultimately favoring defensive bets in FX.”
Euro Bounces After Sharp Loss
Europe traded 0.1% higher at 1.0953, with the euro bouncing back after experiencing a 0.95% loss on Tuesday, its largest daily decline since July last year.
data for December came in slightly better than expected, but this has done little to dilute the feeling generated by Tuesday’s weak eurozone release, which pointed to an economy in recession.
“Dwindling risk sentiment definitely puts EUR/USD at risk of reconnecting with its depressed short-term rate differential, especially considering domestic economic news in the eurozone has remained rather grim,” ING said.
Yen Falls Sharply in Thin Volumes
Elsewhere, traded 0.5% higher to 142.64, with the yen continuing to fall after dropping nearly 0.8% in the previous session. However, these moves have occurred in thin volumes with Japanese markets shut for a week-long holiday.
edged higher to 7.1448, with further losses limited by a stronger-than-expected midpoint fix from the People’s Bank of China after disappointing official purchasing managers index data earlier in the week.
