Dollar falls in cautious trade ahead of Fed minutes

NEW YORK: The dollar turned lower on Wednesday, as sentiment toward riskier assets improved with US equities holding gains on optimism about US-China trade talks and hope for a resolution of Britain's exit from the European Union.

As investors sought out riskier, higher-yielding currencies, the dollar's losses were limited by caution ahead of the release of US monetary policy minutes.

"It's more sentiment-driven if you look across asset classes," said Eric Viloria, FX strategist, at Credit Agricole in New York. "If you look at G10 currencies the British pound gained a little bit on hopes that there could be some progress on Brexit."

The dollar traded higher for most of the morning, then reversed course as sterling rose. Spain's foreign minister was quoted by Bloomberg saying a revised Brexit accord was being "hammered out".  The dollar, measured against a basket of currencies, fell 0.2 percent to 96.329, below a two-month high hit last week.

Investors focused on the upcoming release of minutes from last month's Federal Reserve meeting, seeking more clues to the thinking behind the Fed's dovish statement.

"Dovish minutes that downplay chances of higher rates this year would risk pushing the greenback further away from recent two-month peaks," said Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington.

Analysts said weaker-than-expected US retail sales and industrial production numbers published this month dented the dollar's near-term outlook. According to MUFG, the data "challenged the view that the US economy will continue to hold up relatively well while overseas economies are displaying more acute weakness".

The dollar rose slightly against the yen to 110.67 after Japanese exports fell the most in two years in January.

The yen also slipped on Tuesday after Bank of Japan Governor Haruhiko Kuroda said the central bank was ready to ramp up stimulus measures if sharp yen rises hurt the economy.

China's yuan rose after Washington pressed Beijing to prevent a sharp weakening of its currency as part of any trade deal.

The yuan, a strong performer in 2019, firmed to a three-week high on optimism the world's two largest economies are near agreement on a trade deal.

In offshore markets, the yuan rose 0.4 percent to as much as 6.7168, its strongest since Feb. 1.