The dollar index dropped back to +0.1% on Wednesday, losing earlier gains after Fed meeting minutes failed to live up to hawkish comments policymakers had made since the July 26-27 policy gathering.
The minutes nFOMHJEI0C made clear that the pace of future rate hikes would be data-dependent, bolstering dovish interpretations in light of July CPI, which was released after the meeting and came in flat.
Treasury yields and September Fed rate-hike pricing retreated enough to weaken the dollar against the euro and trim its gains elsewhere.
retail sales were flat overall, but an above-forecast 0.8% monthly rise in core sales nL1N2ZS1HC supported the spillover rise in Treasury yields from gilts before slipping on the Fed minutes.
Earlier, sterling captured the spotlight, falling after UK inflation nL8N2ZT1CC posted a rise to 10.1%, raising fear that a tougher BoE inflation response would increase recession risks as two-year gilt yields rose more than 30bp on the day to a 14-year high of 2.453%.
Sterling recovered most of its losses -- which had taken it down toward August's 1.2004 lows -- after the Fed minutes.
EUR/USD was up 0.1% in choppy trading, while the broader dollar index was also up 0.1% after again failing to clear Tuesday and August's highs by the 50% Fibo of the July-August drop at 106.93-96.
The yen, with JGB yields stuck near zero, struggled against the dollar, euro and sterling early on.
USD/JPY retreated well off its high of 135.50 on EBS, by the 50-DMA and August's highs, but held onto gains of 0.6%.
Upcoming options expiries at 136 and the nearby 61.8% Fibo of the July-August correction still look attractive, particularly after Wednesday's 134.91 low found buyers exactly at the 200-hour moving average.
Twelve consecutive months of Japan trade deficits and the recent flip to a current account deficit suggest the yen's tumble this year hasn't been a magic bullet for the export-led economy nL1N2ZT016.
The Australian dollar fell 1.3%, coming off its 0.6909 low by the daily kijun line that also supported the Aug.
5 intra-month lows.
Slightly below-forecast Australian wage growth tamped down RBA rate hike pricing nL1N2ZT02P before spillover from surging gilts yields lifted them.
Bitcoin fell about 2% in line with broader degrees of derisking.
Thursday's U.S. releases include jobless claims, which have been slowly inching higher from very low levels, Philly Fed August manufacturing data, existing home sales and leading indicators.
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