Dollar drifts near multi-month lows as Treasury yields ease; Fed minutes awaited

The euro inched higher to $1.1577, remaining close to the two-month high touched earlier this week.

Sterling was little changed at $1.3533, holding near a three-month high ahead of British inflation data due later on Wednesday, which is widely expected to show persistent price pressure.

The Japanese yen was little changed at 159.56 per dollar, having given back much of its intervention gains, but it is still well off a multi-decade low of about 164.

The dollar index, which measures the U.S. currency against six major peers, was down marginally at 99.65.

"If the Fed does not follow through with the rate hikes that are being discounted, the upside for bond yields should be very limited here," Harvinder Kalirai, chief global fixed income and currency strategist at Alpine Macro, said in a client webcast.

"The labour market and inflation surprise are rolling over and usually that coincides with a narrowing in the dollar's yield advantage, and that feeds through into a softer dollar."

Meanwhile, a stalemate in the Middle East lifted oil prices to near three-week highs, keeping inflation risk alive. U.S. President Donald Trump said on Tuesday there were no talks with Iran and insisted the Strait of Hormuz was open, contradicting Iran's assertion that the waterway remained shut to shipping.

Elsewhere, the New Zealand dollar and the Australian dollar were little changed, last trading at $0.5874 and $0.7083, respectively.

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