The US dollar was flat on Wednesday as investors reduced their risk appetite ahead of the release of minutes from the Federal Reserve meeting, which could provide clues about the outlook for inflation and interest rates.
The Fed will release the minutes of its latest meeting on Wednesday, with investors looking for any sign of discussions around easing the pace of interest rate hikes.
The dollar index, which measures the greenback against six major peers, was last up 0.056% at 107.130, down 0.65% overnight.
According to Carol Kong, currency strategist at the Commonwealth Bank of Australia, the overnight change reflected an improvement in risk sentiment as stocks and bonds rose amid improved corporate earnings and expectations of a slower rate hike by the Fed.
Fed Chairman Jerome Powell said this month that while borrowing costs should rise further, the central bank may raise interest rates in smaller increments in the future.
New Zealand’s central bank raised interest rates by 75 basis points to a near 14-year high of 4.25% on Wednesday.
The central bank said the cash rate should reach a higher level earlier than previously indicated to curb inflation. It also pushed the projected cash rate peak to 5.5% in September 2023.
The kiwi gained 0.57% to $0.618, while the Australian dollar rose 0.06% to $0.665.
Meanwhile, China has tightened restrictions in some cities due to a surge in COVID-19 cases.
The city of Chengdu will conduct mass testing of residents for five consecutive days.
“The imposition of a new restriction in the near term will undoubtedly have negative economic consequences, but at least for the moment the market seems to be focused on the fact that in the medium term China aims to gradually move towards a strategy of living with COVID,” said Rodrigo Katril, currency strategist at National Australia Bank.
“However, we believe that setbacks in this process are very likely, so we should expect spikes in market volatility along the way.”
The euro was up 0.03% at $1.0305 after gaining 0.6% overnight, while the pound last traded at $1.1888, up 0.04% on the day.
Cryptocurrencies remained volatile, with Bitcoin fluctuating between losses and gains. It was last down 0.21% at $16,163.
