US crude dips on stock build; Mideast tension caps fall

The dollar wallowed at two-month lows against a basket of major currencies early on Wednesday as the market hedged the risk that the Federal Reserve might sound more dovish following a two-day policy review.

The dollar index fell as far as 96.011, reaching a low last seen on March 5. The index last stood at 96.088, having fallen in each of the past five sessions.

"In the near term, momentum should continue to drive further weakness in the USD, though the recent move means that risks are becoming more balanced," analysts at ANZ wrote in a note to clients.

The key risk for the dollar is the outcome of the Fed's policy meeting due at 1800 GMT on Wednesday. The central bank is considering monetary policy at a time when the U.S. economy has hit a soft patch, largely blamed on harsh winter weather, a strong dollar and disruptions at West Coast ports.

Just hours before the Fed releases its statement, the market will get an early read of how the U.S. economy fared in the first quarter. Economists expect the annualised pace of growth to have slowed to 1 percent, from 2.2 percent.

With the dollar on the defensive, the euro came within a hair's breadth of $1.1000 for the first time in over three weeks. It was last at $1.0976.

Sterling climbed to a two-month high of $1.5344, while the Canadian dollar hit a fresh three-month peak of C$1.2015 per USD.

Against the yen, the greenback dipped to a low of 118.77, nearing the bottom end of this month's 118.525-120.845 range.

The big performer was the Australian dollar, which gained more than a full U.S. cent to break above 80 cents for the first time since late January. That was a marked turnaround from a six-year trough of $0.7534 set earlier in the month.

"The standout move in G10 was AUD's sharp gains that have continued with the help of growing expectations of easier policy in China and the recovery in iron ore prices over the last week," said Greg Moore, senior currency strategist at RBC Capital Markets.

Aussie bulls also found some comfort after the head of Australia's central bank refrained from talking down the currency at a speech on Tuesday.

Trading is likely to shift to a lower gear in Asia with a public holiday in Japan set to dampen activity.

Asian equity markets fell early Wednesday as investors digested the raft of earnings due in the region and awaited the Federal Reserve's statement.

The Federal Market Open Committee (FMOC) meeting, which began on Tuesday, will conclude with the release of a post-meeting statement later in the day.

U.S. crude futures slipped on Wednesday after an industry data showed U.S. crude stocks rose last week although inventories in delivery hub Cushing declined for the first time this year, but the fall in oil prices was limited by tensions in Middle East.

U.S. crude lost 17 cents at $56.89 a barrel as of 0003 GMT after it settled up 7 cents at $57.06 on Tuesday.

Brent also shed 9 cents at $64.55 a barrel. The more widely-used global oil benchmark settled down 19 cents, or 0.3 percent, at $64.64 a barrel on the previous session.

Wall Street underpinned the lackluster mood by ending a volatile session mixed overnight, with strong earnings from Merck and gains in IBM leading the blue-chip Dow and S&P 500 higher, closing up 0.4 percent and 0.3 percent each. However, the tech-heavy Nasdaq underperformed, finishing 0.1 percent lower.

Shanghai Comp loses 1%

China's Shanghai Composite sank 1 percent from the get-go, with a flurry of financial earnings grabbing the market spotlight.

U.S. crude futures slipped on Wednesday after an industry data showed U.S. crude stocks rose last week although inventories in delivery hub Cushing declined for the first time this year, but the fall in oil prices was limited by tensions in Middle East.

U.S. crude lost 17 cents at $56.89 a barrel as of 0003 GMT after it settled up 7 cents at $57.06 on Tuesday.

Brent also shed 9 cents at $64.55 a barrel. The more widely-used global oil benchmark settled down 19 cents, or 0.3 percent, at $64.64 a barrel on the previous session.
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