US, Oct 21 : The US dollar traded largely unchanged on Wednesday after falling to a three-week low in the previous session, as declining US Treasury yields and softer crude oil prices weighed on demand for the currency.
The Australian dollar remained near a three week peak against the greenback after Reserve Bank of Australia Deputy Governor Andrew Hauser warned that the inflation outlook had deteriorated significantly. Speaking at a Citi conference, Hauser described the outlook as “materially worse” and said he was uncertain whether another interest rate increase would be necessary next month.
The Australian dollar gained 0.1 per cent to trade at $0.7013, just below Tuesday’s high of $0.7017. Meanwhile, the US dollar index, which measures the greenback against six major currencies, held steady at 101.78 after declining 0.2 per cent a day earlier.
Despite the recent weakness, the US currency has attracted safe-haven demand amid uncertainty stemming from the Middle East conflict and heightened interest in artificial intelligence-related investments. The United States’ relative energy independence has also contributed to the dollar’s appeal during periods of market turbulence.
Oil prices retreated overnight after reaching a five-month high, as investors assessed diplomatic developments involving Iran and Pakistan alongside continued Houthi attacks on Saudi infrastructure and reports of vessels being targeted in the Gulf.
Market sentiment also improved following gains on Wall Street as technology companies entered the earnings season, with SpaceX results drawing attention. Asian markets followed the positive trend, with Japan’s Nikkei and South Korea’s KOSPI advancing on Wednesday.
Carol Kong, an economist and currency strategist at Commonwealth Bank of Australia, said technology companies’ earnings could significantly influence the dollar because equity market sentiment and economic growth expectations are closely linked to the performance of major technology firms.
Kong noted that the US dollar had emerged as the strongest performer among traditional safe-haven assets this year, despite mixed movements across other defensive investments.
She added that demand for the greenback could weaken if the Middle East conflict ends and energy prices decline. However, she expects the currency to strengthen moderately over the coming months as foreign investment flows into US financial markets increase.
In other currency trading, the dollar was little changed at 158.33 yen, while the euro traded at $1.1229 and the British pound stood at $1.33735.
The euro remained under pressure as France faced widespread anti-government protests and mounting fiscal concerns. The French government announced plans to reinforce police with military personnel and implement extensive security arrangements ahead of demonstrations scheduled for Saturday. Officials also acknowledged shortcomings in the response to violence during protests last weekend.
Investors are preparing for a series of central bank policy announcements beginning next Wednesday, when the US Federal Reserve, European Central Bank and Bank of Japan are scheduled to announce their decisions on consecutive days. Markets broadly expect all three institutions to leave interest rates unchanged.
The Reserve Bank of New Zealand and the Bank of Canada will also announce policy decisions on the same day as the Federal Reserve. Traders are anticipating quarter-point interest rate increases from both central banks.
The New Zealand dollar declined 0.1 per cent to $0.5677, while the Canadian dollar remained steady at C$1.4064.
Currency markets are expected to remain sensitive to developments in the Middle East, movements in energy prices, corporate earnings and signals from central banks as investors reassess the outlook for global growth and interest rates.