By William L. Watts and Sarah Turner, MarketWatch
FRANKFURT (MarketWatch) — The dollar traded little changed Wednesday as the euro weakened slightly after having hit nearly a seven-week high against the U.S. unit, with currency investors awaiting the release of minutes from the Federal Reserve’s latest policy meeting.
The ICE dollar index DXY +0.11% , which measures the greenback against a basket of six other major currencies, stood lately at 81.899, off from 81.939 late Tuesday.
The WSJ Dollar Index XX:BUXX +0.13% , which tracks the U.S. currency against a basket of heavily-traded rivals, rose to 71.37 from 71.25.
Minutes from the July 31-Aug. 1 meeting of the rate-setting Federal Open Market Committee are scheduled for release at 2 p.m. Eastern.
“We expect to hear some dovish overtones — especially given the Fed shifted to an explicit easing bias at the meeting, pledging to ‘provide additional accommodation as needed to promote a stronger economic recovery,’ ” said Chris Walker, strategist at UBS, in a note.
“As such this suggests scope for additional dollar/yen downside later today, and the focus on ... Bernanke’s speech at Jackson Hole ... is likely to intensify,” he wrote.
Fed chief Ben Bernanke is scheduled to deliver a speech at the Federal Reserve Bank of Kansas City’s annual retreat in Jackson Hole, Wyo., on Aug. 31.
The dollar lost 1% against the euro in Tuesday trading, amid growing optimism for European Central Bank intervention in the sovereign-debt markets after weekend reports suggested a debt-yield cap for weaker nations’ bonds.
The euro EURUSD -0.1634% slipped to $1.2447, off slightly from $1.2463 on Tuesday, when the shared currency hit its highest against the dollar since early July.
Some analysts contend euro bulls are getting ahead of themselves, failing to take into account the implications of Spain’s reluctance to request help from the euro-zone rescue funds — a prerequisite for any bond-buying by the ECB, which has yet to work out a detailed plan. Read more on Spain vs. ECB: Who will blink first?
Also Wednesday, Greek Prime Minister Antonis Samaras is set to hold meetings with Jean-Claude Juncker, who chairs the Eurogroup of euro-zone finance ministers, and will meet German and French leaders this week as well.
In an interview with Germany’s Bild newspaper published Wednesday, Samaras said that Greece doesn’t need additional aid on top of the recently agreed second rescue package but that it needs more time to implement unpopular austerity measures and other reforms.
“All we want is a little room to breathe, to get the economy going and to increase government revenues,” Samaras said, according to Bild. “More time does not automatically mean more money.”
Euro destined to move lower?
Suggestions that Greece will get more time to meet those obligations could work to prompt more gains for the euro against the dollar, Crédit Agricole strategists said, forecasting the common currency may test a $1.253-$1.261 range.
Still, “unless leaders go as far as signaling that the ECB is in fact ready to cap bond yields or spreads … we feel that the aforementioned ranges will still be appropriate ones to unload euro in aiming for sub-$1.2280 targets, as the recent rally has largely been ‘squeeze’ driven,” they said.
Among the other major currency pairs, the British pound GBPUSD +0.0313% traded at $1.5787, up slightly from $1.5779 late Tuesday, while the Australian dollar AUDUSD -0.4363% eased to $1.0443, down from $1.0473.
Against the Japanese yen, the dollar USDJPY -0.0611% bought ¥79.22, little changed from ¥79.25 in late trading on Tuesday. The dollar had initially gained on the yen after data showed Japan swinging to a July trade deficit, with exports falling more than expected. Read more on Japan’s trade data.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
Sarah Turner is MarketWatch's bureau chief in Sydney.
