By Peter Nurse
Investing.com - The U.S. dollar edged lower Wednesday as gains in global equity markets boosted risk sentiment while Federal Reserve officials reined in interest rate hike expectations.
At 3:15 AM ET (0815 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, edged 0.2% lower to 96.135, retreating from the 18-month high of 97.441 seen at the end of last week.
The dollar, often seen as the ultimate safe haven in times of stress, has seen selling Wednesday following gains on equity markets around the globe on the back of strong results from tech giant Alphabet (NASDAQ:GOOGL).
Risk-sensitive currencies, like the Australian dollar, have benefited, with AUD/USD up 0.1% to 0.7135, while EUR/USD has gained 0.1% to 1.1275 ahead of the release of the annual Eurozone CPI figure for January.
Also weighing on the dollar have been recent moves by a series of Fed officials to dilute expectations of a hefty 50 basis points hike in March by the U.S. central bank even with inflation at a 40-year high.
St. Louis Federal Reserve President James Bullard, often seen as one of the more hawkish of the Fed policymakers, said on Tuesday he favors successive rate increases at the Fed's March, May and June meetings.
But he disagreed with the idea of starting with a half-percentage point hike in March, saying markets have already started to push up borrowing costs.
Additionally, Federal Reserve Bank of Kansas City President Esther George, another hawk, said the central bank should be cautious and could take less aggressive actions in raising interest rates by shrinking the balance sheet more forcefully.
Traders will keep an eye on the release of the ADP private payrolls, at 8:15 AM ET (1315 GMT), ahead of Friday’s monthly official jobs report. Private job growth is likely to have decelerated to 207,000 in January after recording its fastest pace in seven months in December, when it rose 807,000.
Elsewhere, GBP/USD rose 0.1% to 1.3539, with sterling maintaining recent strength ahead of Thursday’s Bank of England meeting, where a second hike in less than two months is widely expected.
USD/JPY fell 0.1% to 114.56, continuing to move away from last week's top at 115.68, while USD/CNY was flat at 6.3610.