The U.S. dollar fell on Wednesday morning in Asia ahead of the Fed’s release of the minutes from its meeting. The minutes from the Fed’s meeting are widely expected to offer clues to the Fed’s policy outlook moving forward.
The euro, meanwhile, declined to an almost three-month low against the dollar as German economic data failed to meet the expectations. The data also raised concerns about Germany’s economic recovery from COVID-19.
The euro traded at $1.1820 after declining to its lowest level in several months during the previous session. The euro also dropped against the yen to 130.81, close to a two-month low of 130.05 hit on June 21.
The German economic sentiment index declined to 63.3. Separate data also said that German factory orders fell 3.7% month-on-month in May.
The U.S. dollar index that tracks the country’s currency against a basket of other currencies dropped 0.01% to 92.532.
The USD/JPY pair was stable at 110.61. The NZD/USD gained 0.06% to 0.7015.
The Australian dollar and risk-sensitive currencies
Meanwhile, the ongoing production dispute among the members of the Organization of Petroleum Exporting Countries and allies (OPEC+) that caused a plunge in prices affected sentiment for risk-sensitive currencies. Disagreement within OPEC has the potential to trigger a more volatile period of oil.
Oil prices initially jumped to the highest level in several years on news that OPEC+ ended their meeting on Monday with no action. A proposed plan by OPEC, Russia, as well as other partners to bring 400,000 barrels a day to market was rejected by the UAE.
Members of OPEC and its partners agreed to return 400,000 barrels a day to the market starting in August. However, Saudi Arabia’s neighbor UAE sought to also have its production baseline increased from 3.1 million barrels a day to 3.8 million barrels. That was the sticking point with OPEC de facto leader Saudi Arabia. There was also a stalemate over whether the deal would include an extension of the plan to the end of 2022. Without an agreement, 5.8 million barrels a day will remain off the market even as demand continues to rise.
The Australian dollar also gave up its gains from Tuesday as investors reacted to the RBA’s policy decision. The country’s central bank announced a smaller, third round of its quantitative easing program. The central bank retained the April 2024 bond for its three-year target of 0.1%. The interest rate remained unaltered at 0.1%.