Dollar Weakens Awaiting Fed Signals on Rate Hikes

The US dollar remained weaker on Wednesday as markets focused on upcoming Federal Reserve meetings and speeches for hints about potential interest rate hikes. The euro saw its biggest gain in seven weeks the previous day after French bond yields dropped following the election frontrunner's pledge to cut spending.

The yen weakened slightly, even after a Bank of Japan policymaker indicated support for interest rate increases. Later in the day, the Fed was set to release minutes from its September meeting, where rates were raised to combat inflation. Recent economic data, including softer personal consumption expenditures (PCE) and jobs reports, have led to a less aggressive stance from Fed policymakers.

The dollar index edged up slightly to 101.94, following a 0.27 per cent drop the day before. The euro dipped 0.08 per cent to US$1.1249, while the yen weakened 0.19 per cent to 158.43 per dollar. Sterling also fell 0.08 per cent to US$1.3262. Global bond yields have risen due to expectations of central bank rate hikes and concerns over government finances.

The euro surged on Tuesday after Marine Le Pen, the far-right French presidential candidate, increased her target for spending cuts. Meanwhile, the Bank of Japan may signal this month that underlying inflation has hit its 2 per cent target, suggesting further rate hikes. Expectations for a Fed rate hike in October have dropped to 20.5 per cent, but markets anticipate an 84.5 per cent chance of a hike in December.

In cryptocurrencies, bitcoin fell 0.22 per cent to US$85,438.59, and ether declined 0.12 per cent to US$2,695.22. Fed officials Christopher Waller, Neel Kashkari, and Alberto Musalem were scheduled to speak later in the day, along with the release of consumer credit data for August.