The dollar and euro barely moved on Wednesday, ahead of a meeting between U.S. President Donald Trump and European Commission President Jean-Claude Juncker at a time investors are focused on the trade rift between the two economic powers.
Fears of a trade war with the United States kept the euro trapped in narrow ranges as Juncker travels to Washington on Wednesday for trade-focused talks with Trump.
The talks come after the U.S. imposed tariffs on European Union steel and aluminum and Trump's threats to extend those measures to EU-made cars.
"If there is a further escalation of the trade issue, that could potentially hurt the risk sentiment and put pressures on the dollar/yen," said Shinichiro Kadota, senior FX & rates strategist at Barclays (LON:BARC).
Investors were also eyeing a European Central Bank (ECB) policy meeting on Thursday for direction.
The ECB guided markets for steady rates "through the summer" of 2019 at a meeting last month, when it also announced it would shut its signatory bond-purchasing program in December.
The yen found some support early this week on expectations the Bank of Japan might be a step closer to scaling back some of its aggressive monetary stimulus.
Risk appetites remained mostly firm, supported by strong U.S. corporate earnings and hopes that China will boost fiscal support for its economy.
The Australian dollar slumped after data on Wednesday showed inflation remained stubbornly low last quarter despite fairly robust economic growth. It traded 0.3 percent lower at $0.7398.
Kazushige Kaida, head of foreign exchange at State Street Bank in Tokyo, said the market is waiting to see how Beijing would react if the United States moves to put tariffs on all $500 billion of its imports from China.
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