Peter Nurse

Investing.com. The U.S. currency edged lower Wednesday morning in European trading. It lost some overnight gains due to rising Treasury yields. Traders will be looking to minutes from last Federal Reserve meeting as clues regarding the timing and extent of tightening. 

The Dollar Index (which tracks the greenback in relation to a basket six currencies) traded at 2.55 am ET (755 GMT). It was 0.1% less than its previous high of 96.210 on Tuesday.

“A break of 95.50 or 96.50 will signal the index’s next directional move, although if U.S. yields stay firm, the greenback looks set to continue to outperform in the major currency space,” said Jeffrey Halley, an analyst at OANDA.

After Tuesday’s sharp rise to pre-pandemic levels, U.S. yields slowed slightly Wednesday as investors prepared for interest rate increases by the Federal Reserve in an effort to reduce high inflation.

After climbing to a 5-year high of 116.2 on Tuesday, the Bank of Japan was seen as one of the few major central banks that has not sanctioned tightening of policy. It rose 0.2%, to 115.94.

It fell by 0.1%, to 1.1300. The two-week low was 1.3535. Risk-sensitive, however, dropped to 0.7236.

The U.S. Federal Reserve will release the from its December meeting later in the day, and will be studied for clues to the central bank’s timetable for rate hikes.

Fed Funds futures indicate that interest rates will rise by May. However, there are increasing expectations that the central banks could act sooner, due to the strong U.S. economy.

The Fed is on track to end its asset-buying program in March, potentially  opening the way for raising rates, after it on Dec. 15 doubled the pace of tapering purchases. 

Also due for release Wednesday will be the data, a closely watched precursor to Friday’s .

edged lower to 4.0398 after Poland’s central bank lifted its benchmark interest rate by 50 basis points on Tuesday, matching December’s hike, as it sought to combat soaring inflation.

“We expect that in the face of a prolonged period of elevated inflation, MPC chair Adam Glapiński will suggest the Council remains open to further monetary tightening this year, which should support the zloty,” said Rafal Benecki, an analyst at ING.