© Reuters.  Dollar at 1-week highs before Fed minutes© Reuters. Dollar at 1-week highs before Fed minutes

Investing.com – The dollar edged up to one-week highs against a currency basket on Wednesday, as investors awaited the minutes of the Federal Reserve’s latest policy meeting for fresh indications on the future pace of interest rate hikes.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was up 0.12% at 89.75 by 03:24 AM ET (08:24 AM GMT).

The index has climbed higher after it sank to a low of 88.15 on Friday, the weakest since December 2014.

The Fed was to release the minutes of its January meeting later on Wednesday and a hawkish tone could reinforce expectations for a faster pace of monetary tightening this year and boost the dollar.

The dollar has weakened in recent months as expectations for a faster pace of interest rates by the Fed have been offset by a range of bearish concerns.

Worries that large corporate tax cuts and increased government spending will negatively impact the U.S. fiscal deficit, which is projected to balloon to near $1 trillion in 2019 have pressured the currency.

The tax cuts and spending plans could backfire by overheating an already strong economy and causing an unwanted pick-up in inflation.

Expectations for a faster rate of monetary tightening outside the U.S., which would lessen the divergence between the Fed and other central banks, have also eroded the dollar’s relative yield attraction for investors.

The dollar was higher against the yen, with USD/JPY rising 0.31% to 107.03, extending its bounce from Friday’s 15-month lows of 105.55

The euro was a touch lower, with EUR/USD down 0.15% to 1.2319, retreating further from Friday’s three year high of 1.2554.

In the euro zone, data showed that French private sector growth slowed, but remained solid in February.

Sterling was also lower, with GBP/USD shedding 0.17% to trade at 1.3972 ahead of the latest UK jobs report later in the trading day.

Traders were looking to figures on wage growth that could help underline expectations for a rate hike by the Bank of England in May.

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