Dollar Holds Near Lows as Treasury Yields Cool; Fed Minutes in Focus

The U.S. dollar remained close to multi-month lows against major currencies on Wednesday, as a recent rise in Treasury yields took a breather. Investors are now turning their attention to the release of the Federal Reserve's meeting minutes, hoping for clarity on the future path of interest rates.

The euro edged up to $1.1577, hovering near a two-month high. Sterling was steady at $1.3533, holding close to a three-month peak ahead of UK inflation figures due later in the day, which are expected to show persistent price pressures. The Japanese yen traded at 159.56 per dollar, having given back much of its recent intervention-driven gains but remaining well off its multi-decade low.

The dollar index, which measures the currency against a basket of six major peers, slipped marginally to 99.65. The pause in the Treasury selloff came during a week with few major economic data releases. The yield on the 10-year Treasury note extended its decline to 4.702%, while the 30-year bond yield fell to 5.282%.

Market participants are now looking to the Federal Open Market Committee's minutes for signals on policymakers' rate views. Recent data pointing to a softer U.S. economy, including unexpected job losses in July and mild inflation, has led investors to scale back rate-hike bets. One strategist noted that if the Fed does not follow through with the rate hikes currently priced in, the upside for bond yields should be limited, which could further weaken the dollar.

Meanwhile, oil prices held near three-week highs due to a stalemate in the Middle East, keeping inflation risks alive. U.S. President Donald Trump said on Tuesday there were no talks with Iran and insisted the Strait of Hormuz remained open, contradicting Iran's claim that the waterway was shut to shipping.

Elsewhere, the New Zealand dollar and the Australian dollar were little changed, trading at $0.5874 and $0.7083, respectively.