The US dollar traded flat on Wednesday ahead of the release of the minutes of the Fed meeting, while the New Zealand currency was supported by sentiment of a record rate hike to curb rampant inflation.
The U.S. dollar index, which measures the currency against a basket of six major currencies, traded at 106.52 with a decline of 0.36%.`
The US dollar's performance this year has been largely influenced by large-scale rate hikes aimed at curbing price increases. However, the slower-than-expected inflation data has caused investors to hedge bets on future rate hikes.
Market players are focusing on the minutes of the meeting from the Fed which will be released at 2 am later for any indication on the prospects for a rate hike.
"Currently FX traders are likely to be torn between the continued hawkish comments by Fed members and the prospect of what the Fed will do in 2023," said currency analysts at Commerzbank.
New Zealand's currency strengthened by 0.7%, nearing a three-month high, after the country's central bank raised interest rates by a record amount despite warning the economy could be in recession for the rest of the year.
The Reserve Bank of New Zealand raised its benchmark rate by 75 basis points to 4.25% – the highest of any G10 economy – and said it may need to rise faster than previously projected.
On the other hand, the Euro strengthened 0.30% to a price level of 1.0332 after fresh data showed the decline in Eurozone business activity eased slightly in November.
Meanwhile, Sterling gained 0.4% to $1.19345, after early British economic activity data beat expectations, although it still showed a contraction was underway.
