• The USD Index (DXY) struggles to lure buyers amid bets for a Fed rate cut by mid-2024.
• Elevated US bond yields and a softer risk tone should help limit losses for the Greenback.
• Traders further prefer to wait for the FOMC minutes before placing fresh directional bets.

The US Dollar (USD) remains under some selling pressure during the Asian session on Wednesday and trades near its lowest level in almost three weeks touched the previous day. The USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes below the 104.00 mark as traders keenly await the release of the FOMC minutes for a fresh directional impetus.

Investors will look for fresh cues about the Federal Reserve's (Fed) rate-cut path, which will play a key role in determining the near-term trajectory for the USD. In the meantime, growing acceptance that the US central bank will eventually start easing its monetary policy by mid-2024 and expectations of four 25 basis points (bps) rate cuts by the end of this year turn out to be a key factor undermining the Greenback.

Meanwhile, investors have already priced out the possibility of early rate cuts by the Fed amid signs that the US economy is in good shape and hawkish comments by influential FOMC members. This remains supportive of elevated US Treasury bond yields, which, along with a softer tone around the equity markets, could lend some support to the safe-haven Greenback and help limit any further depreciating move.

The initial market reaction to the People’s Bank of China's (PBoC) decision on Tuesday to lower the five-year loan prime rate by 25 bps – the biggest cut since it was introduced in 2019 – turned out to be short-lived amid persistent geopolitical tensions. In fact, a string of attacks on shipping in the Red Sea by Houthi rebels in Yemen have raised the risk of a further escalation of military action in the Middle East.

In addition, a White House official said that the US will announce a major sanctions package against Russia on Friday to hold President Vladimir Putin accountable for the two-year war on Ukraine. Moreover, the DXY has been showing resilience below the 100-day Simple Moving Average (SMA), which also warrants caution before positioning for an extension of the pullback from a three-month top touched last week