The U.S. dollar drifted near multi-month lows against major peers on Wednesday as Treasury yields eased from recent highs, with investors awaiting minutes of the Federal Reserve's latest policy meeting for clues on the path of interest rates.
The euro inched up 0.1% to $1.1585, remaining close to the two-month high touched earlier this week.
Sterling was a touch higher at $1.3538, holding near a three-month high ahead of British inflation data due later on Wednesday, which is widely expected to show persistent price pressure. (GBHICY=ECI)
The Japanese yen also strengthened marginally to 159.32 per dollar, pulling away from the closely-watched 160 level after giving back much of its intervention gains.
The dollar index , which measures the U.S. currency against six major peers, was down 0.1% at 99.55.
A selloff in U.S. Treasuries appeared to have paused amid a week light on economic data or other obvious catalysts. The yield on the benchmark U.S. 10-year Treasury note extended declines and was last at 4.686%, while that on the 30-year bond fell to 5.268% from its highest in nearly 20 years.
Market participants now turn to the Federal Reserve's release of minutes from the most recent meeting of its monetary policy-setting Federal Open Market Committee later in the day, looking for clues as to policymakers' views on interest rates.
Data released in the past few weeks have pointed to a softer U.S. economy, including unexpected job losses in July and mild inflation readings, leading investors to scale back rate-hike bets.
"If the Fed does not follow through with the rate hikes that are being discounted, the upside for bond yields should be very limited here," Harvinder Kalirai, chief global fixed income and currency strategist at Alpine Macro, said in a client webcast.
"The labour market and inflation surprise are rolling over and usually that coincides with a narrowing in the dollar's yield advantage, and that feeds through into a softer dollar."
Meanwhile, a stalemate in the Middle East lifted oil prices to near three-week highs, keeping inflation risk alive. U.S. President Donald Trump said on Tuesday there were no talks with Iran and insisted the Strait of Hormuz was open, contradicting Iran's assertion that the waterway remained shut to shipping.
Elsewhere, the Canadian dollar rose slightly to $1.3880 after U.S. President Donald Trump paused imposing a 50% tariff on Canadian goods for three days, saying the countries had reached a deal.
The Australian dollar dipped 0.2% to $0.7069 as a selloff across major stock markets pressured risk assets. The New Zealand dollar was little changed at $0.5874.
