Dollar firmer ahead of Fed minutes; Turkish lira tumbles
The dollar inched higher versus a basket of currencies on Wednesday, with investors awaiting minutes of the Federal Reserve's last policy meeting for hints on the pace of further U.S. monetary tightening.
The dollar index against a basket of six major peers rose 0.1 percent to 93.670 (DXY). The dollar index has pulled back since hitting a five-month high of 94.058 on Monday.
The rise to Monday's high marked a gain of more than 5 percent from mid-April, which was driven by generally upbeat U.S. economic data and expectations the Fed would raise interest rates at least two more times this year.
Against the yen, the dollar fell 0.4 percent to 110.48 yen , edging away from a four-month high of 111.395 yen set on Monday. Investors are now looking to the release on Wednesday of the Fed's minutes from its most recent meeting, at which it kept interest rates steady.
In the Fed policy meeting held in early May, the Fed also said inflation had "moved close" to its target and that "on a 12-month basis is expected to run near the Committee's symmetric 2 percent objective over the medium term."
The dollar is likely to stay in a holding pattern ahead of the Fed minutes, with the focus on further details related to the inflation outlook, said Heng Koon How, head of markets strategy for UOB in Singapore.
"We hope to have a bit more clarity on the inflation outlook from the Fed. The second dimension is basically how tolerant the Fed (policymakers) are of a possible inflation overshoot above two percent," Heng said.
The euro fell 0.1 percent to $1.1762 (EUR=), but still remained above a six-month low of $1.1717 on Monday.
In emerging markets, a sell-off in the Turkish lira deepened after rating agencies sounded the alarm on Tuesday about plans by President Tayyip Erdogan to tighten his grip on monetary policy.
The lira tumbled to a record low of 4.8450 per U.S. dollar in early Asian trade on Wednesday, with market participants citing talk of stop-loss lira selling by Japanese retail investors.
After paring some losses, the lira stood at 4.7900 per dollar, still down about 2.5 percent on the day.
Against the yen, the lira (TRYJPY=R) tumbled 2.9 percent to 23.0468 yen