The U.S. dollar faced continued pressure on Wednesday, extending a three-week low from the previous session. The decline was driven by a drop in Treasury yields and crude oil prices, which diminished the dollar's appeal as a safe-haven asset.
The Australian dollar neared a three-week high against the greenback, supported by hawkish remarks from Reserve Bank of Australia Deputy Governor Andrew Hauser. He noted that inflation outlook had worsened, leaving uncertainty over potential interest rate hikes next month. The Aussie rose 0.1% to $0.7013, just below Tuesday's peak of $0.7017.
The US dollar index, which tracks the currency against six major peers, held steady at 101.78 after a 0.2% drop on Tuesday. Investors have favored the dollar amid market volatility stemming from Middle East tensions and AI-driven market frenzy, partly due to the U.S.'s energy independence.
Oil prices eased overnight after reaching a five-month high, as traders weighed geopolitical developments in the Middle East against ongoing attacks on Saudi infrastructure. Meanwhile, Wall Street posted gains as technology earnings season began with SpaceX SPCX.O results, while Japan's Nikkei and South Korea's KOSPI also rallied.
Carol Kong, economist at Commonwealth Bank of Australia, noted that tech earnings could significantly impact the dollar's performance. While the dollar has been a standout safe-haven asset this year, its appeal may fade once Middle East conflicts ease and energy prices retreat. However, she expects the dollar to trend modestly higher in coming months due to foreign capital inflows into U.S. markets.
The dollar remained little changed at 158.33 yen, $1.1229 per euro, and $1.33735 versus sterling. Traders remained cautious about the euro amid France's anti-government protests and deteriorating fiscal situation. Central bank policy decisions from the Federal Reserve, European Central Bank, and Bank of Japan are set for next week, with no rate changes expected.