FOREX-Dollar climbs ahead of Fed minutes; euro slides towards 17-month lows

​The dollar gained against major peers on Wednesday, aided by higher oil ‌prices, ​while investors awaited Federal Reserve meeting minutes and remarks from policymakers for signals on a potential rate hike. The euro sank 0.83% to $1.1166, closing in on the 17-month lows from last week as French bonds came under renewed pressure on fiscal concerns. The yen weakened 0.09% to 158.265 per dollar, even after a dovish Bank of Japan board ‌member said she would support interest rate increases.

"For the euro-dollar to go below 1.10, you would have to price in more Fed rate hikes than it's currently priced in, and that is not our base case," said Adarsh Sinha, head of global G10 FX strategy, BofA Global. Later on Wednesday, the US central bank is due to release minutes of its September policy meeting, when it raised interest rates for the first time since 2023 to contend with inflation.

The dollar index, ‌which measures the US dollar against a basket of currencies, rose 0.64% to 102.49, recovering from a 0.27% slide on Tuesday, catching a safe-haven bid as Middle East supply concerns pushed Brent futures back above $100 a barrel. "We've ‌been able to have that long-dollar view on for a few weeks now. It's worked quite nicely. But I think there's an element of momentum starting to slow here," said Dominic Bunning, head of G10 FX strategy at Nomura, adding that higher oil prices were lending the dollar short-term support.

"If we get any sign of improvement in the Middle East (situation) going into the midterms, or further signs that US data is softening ... that could also be something that weighs on quite elevated rate expectations in the year ahead." Recent comments from Fed policymakers have ⁠come across as less ​hawkish following lower-than-expected personal consumption expenditure data and jobs figures ⁠last week.

The chance of a US rate hike of at least 25 basis points in October stands at 21.6%, from about 51% a week ago, according to CME FedWatch, but markets are pricing in a 68.6% chance of a hike at the Fed's December meeting. Fed officials ⁠Christopher Waller, Neel Kashkari and Alberto Musalem are due to speak later on Wednesday. The Fed is also scheduled to release consumer credit data, which is expected to show a decrease to $15 billion in August from $18.06 billion in July.

EURO'S BOND ROUT Bond yields around the ​world have climbed in recent weeks due to expectations of central bank rate hikes as well as concerns about government finances. French debt is under growing pressure as politicians struggle to curb the budget ⁠deficit ahead of a divisive election in 2027. The calling of a snap election in Spain added to the pressure on the euro.

But the euro rallied sharply on Tuesday after far-right French presidential candidate Marine Le Pen raised her target for spending cuts to €140 billion ($158 billion) from €125 billion in savings ⁠originally ​planned if she wins power in 2027. Matthew Ryan, head of market strategy at Ebury, said the proposed spending cuts could support French bonds and the euro by easing fiscal concerns, but viewed Tuesday's rally largely as a technical rebound after the recent selloff.

"With nothing resolved, the 2027 budget still to clear a divided parliament and the election still months away, we expect the French political risk premium to remain elevated, which could act to cap any ⁠relief rally in the euro," Ryan wrote in a note. France's economic situation is serious, given the rise in its borrowing costs, but the country does not at this point need help from the European Central Bank, Bank ⁠of France head Emmanuel Moulin said.

Sterling lost 0.62% to $1.3195. The euro ⁠fell 0.21% to 84.63 pence, its lowest level since June 2025.

The Bank of Japan's new policymaker Ayano Sato said in an interview with the Kyodo news agency that she supports the idea of raising interest rates in several stages. The BOJ may signal this month that underlying inflation has roughly hit its 2% target, three people familiar ‌with its thinking said, highlighting its readiness ‌to raise interest rates again. In cryptocurrencies, bitcoin fell 2.3% to $84,255.14, and ether declined 4.5% to $2,576.92.