ENM: Dollar falls before Fed minutes, euro stays weak
LONDON: The dollar lost ground on Wednesday as the release of minutes from the US Federal Reserve's June meeting neared, with market players wary of hints of another round of asset buying in the coming months.
The euro stayed weak on unease over how policymakers will tackle the debt crisis after it emerged there would be no quick judgment from a German court on the euro zone's bailout fund.
It held above a two-year low against the dollar but remained vulnerable, dropping to a three and a half year low against the UK pound and a record low versus the higher-yielding Australian dollar.
As well as the debt crisis doubts, the single currency was also further pressured by the European Central Bank's decision to cut interest rates last week, bringing the deposit rate to zero.
The euro was up 0.3 per cent against the dollar at $1.2283, still not far from Monday's two-year low of $1.2225. Its gains came as the index that measures the dollar's value against a basket of currencies lost 0.25 per cent to 83.179.
A break below Monday's low would open the door to a test of the June 2010 trough of $1.1875.
The Fed minutes, due for release at 1800 GMT, will throw more light on the central bank's plans after US policymakers expressed different opinions on the need for more easing.
"If we do get some announcement of more QE (quantitative easing) in the US then it will provide support for euro/dollar and we could see a squeeze of short euro positions," said Paul Robson, currency strategist at RBS.
"But the euro will stay weak on low yield, weak growth and debt uncertainty."
Analysts said any renewed rise in Spanish and Italian government debt yields could push the euro down further as concerns about political hurdles and scepticism over the euro zone's decision-making process grow.
The ECB's rate cut removed a pillar of support for the euro, raising chances it could become a funding currency of choice for buying higher-yielding assets.
The euro fell to 78.84 pence against sterling, its weakest since late 2008, while it hit an all-time low against the Australian dollar of A$1.1960.
The Australian currency also gained against the US dollar , backed by its higher yields, with Australian interest rates at 3.5 per cent. It was last up 0.8 per cent at $1.0264.
