Euro near three-month lows; dollar awaits Fed minutes

London

THE euro traded near a three-month low against the US dollar on Wednesday after German data raised doubts about the strength of the economic recovery, while the US currency awaited the minutes from the last Federal Reserve policy meeting.

The European single currency changed hands at US$1.1820, having touched a three-month low of US$1.1806 on July 6.

Against the yen, it fell to 130.81 yen, edging near its two-month low of 130.05 set on June 21.

Investor sentiment in Germany, the euro zone's biggest economy, fell sharply in July, though it remained at a very high level, the ZEW economic research institute reported.

Separate data showed orders for German-made goods posted their sharpest slump in May since the first lockdown in 2020, hurt by weaker demand from countries outside the euro zone.

Other risk-sensitive currencies took a hit after oil prices plunged as OPEC producers cancelled a meeting when major players were unable to come to an agreement to increase supply.

The Australian dollar traded 0.3 per cent higher at US$0.7514, stabilising after a bounce on July 6 when the Reserve Bank of Australia (RBA) took a first step towards stimulus tapering.

The RBA announced a third round of its quantitative easing programme, albeit at a size smaller size than the previous two rounds, while retaining the April 2024 bond for its three-year yield target of 0.1 per cent.

The Japanese yen traded 0.1 per cent lower at 110.73 yen per dollar, still holding on to gains from its 15-month low of 111.64 touched last week. The yen's gains came as US bond yields fell to their lowest levels since February after data signalled that the service sector expanded at a slower pace.

Yields have fallen in recent weeks as many speculators who had bet that rising inflation could prompt the Fed to tighten its policy soon have been forced to bail out of their positions.

The dollar index, which measures the greenback against a basket of peer currencies, traded flat on the day, at 92.550, consolidating near its recent 3-month high.

Minutes from the Fed's June policy meeting due later on Wednesday, could offer fresh hints on the central bank's policy outlook.

Elsewhere, cryptocurrencies were in a holding pattern, with Bitcoin little changed at US$34,643 and Ether at US$2,372. REUTERS