Dollar edges higher in cautious trade ahead of Fed minutes

NEW YORK: The dollar on Wednesday recovered from the previous sessions' roughly two-week lows to trade slightly higher on the day within narrow ranges as traders remained cautious ahead of the release of US monetary policy minutes.

The minutes from last month's Federal Reserve meeting will be closely watched following a dovish statement a few weeks ago.

"The minutes may shed light on whether the Fed will raise rates at all this year," said Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington.

"Dovish minutes that downplay chances of higher rates this year would risk pushing the greenback further away from recent two-month peaks," he added.

The dollar, measured against a basket of currencies, edged 0.1 percent higher at 96.578, below a two-month high hit last week but modestly higher than Tuesday's two-week low.

Analysts say weaker than expected US retail sales and industrial production numbers published this month have dented the near-term outlook for the dollar. 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, however, rose 0.2 percent against the yen to 110.82 after disappointing trade numbers showed Japanese exports fell the most in two years in January.

The yen had also taken a hit 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, meanwhile, rose after the United States 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 Washington and Beijing are close to agreeing on a deal to end their trade conflict.

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

The euro was little changed against the dollar at $1.1344 as investors waited for cues on where US monetary policy is headed after the Fed's recent dovish tilt.

Europe's single currency has struggled this month as worries grow about the state of the euro zone economy. So far this month, the euro is down 0.9 percent.

ABN AMRO analyst Georgette Boele said the bank had downgraded its euro forecasts for 2019 because of economic concerns. But she also expects limited downside in the currency because weaker-than-expected euro zone data have had a limited negative impact on the euro, suggesting that most of the weakness is already reflected in the price.