NEW YORK, July 8 : The U.S. dollar edged lower after reaching its highest level in about a week on Wednesday after U.S. President Donald Trump said an interim memorandum of understanding signed with Iran to end their conflict was "over", while investors awaited Federal Reserve meeting minutes later in the day.Trump made the statement before a NATO summit in Turkey, in the wake of recent attacks on U.S. bases by Iran in the Gulf, and also said that he did not want to engage with Tehran. Trump also warned of additional strikes on Iran but said he would let negotiators keep talking. A source familiar with the talks at the summit said Trump did not repeat his announcement of a termination. Oil prices jumped, with U.S. crude up 6.86 per cent to $75.27 a barrel and Brent climbing to $79.50 per barrel, up 7.2 per cent on the day. U.S. Treasury yields also climbed.
The dollar index, which measures the greenback against a basket of currencies, fell 0.08 per cent to 101.10 after earlier climbing to 101.25, with the euro down 0.02 per cent at $1.1409."The dollar is a little more subdued at this point, and part of that is those higher prices are going to impact foreign currencies more than the dollar, meaning the European Central Bank, who's already moved once, may have to move faster," said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle."The challenge is guessing who moves first - is it the Fed that feels that pressure, or do they delay that, defer that, and the ECB has to move faster - and so that's what's keeping a bit of a lid on the dollar at this point, even though we've got the 10-year Treasury yield up."Expectations of a rate hike of at least 25 basis points from the Fed at its July meeting inched up to 33.7 per cent from 26.7 per cent in the prior session, while odds for the September meeting rose to 69.4 per cent from 61.9 per cent, according to CME FedWatch. NEW ZEALAND HIKES RATE, FED MINUTES IN FOCUSMeanwhile, the New Zealand dollar strengthened 0.35 per cent versus the greenback to $0.5697 although it was off its earlier highs, after the Reserve Bank of New Zealand hiked rates by 25 basis points to 2.5 per cent to curb inflation pressures, as most economists had expected. It said that "some further reduction in monetary stimulus is likely to be required" to control inflation. Analysts at Goldman Sachs said in a note that they see the start of a hiking cycle in New Zealand, "albeit a short one" as a positive for the currency "and part of the broader catch-up in macro conditions and monetary policy to many of its G10 peers." Later in the day, markets will eye the minutes from the Federal Reserve's June meeting, and first under new chair Kevin Warsh, for insight on the "family fight" the central bank leader said unfolded last month as officials left interest rates unchanged and emphasized their commitment to managing inflation. Against the Japanese yen, the dollar strengthened 0.27 per cent to 162.52 and was on track for a fourth straight daily advance as traders remained on guard for signs of a possible intervention from Japanese authorities.Sterling strengthened 0.12 per cent to $1.3368.
