Investing.com - The euro was almost unchanged against the dollar on Wednesday as investors stayed on the sidelines ahead of the minutes of the Federal Reserve’s latest meeting later in the day.
EUR/USD was trading at 1.2541, holding above Tuesday’s lows of 1.2442.
The euro gained ground on Tuesday after a stronger-than-forecast German ZEW economic sentiment index bolstered the outlook for the euro zone’s largest economy.
Investors remained cautious ahead of the minutes of the Fed’s October meeting, which were expected to highlight the growing monetary policy divergence between the U.S. central bank and its peers in Europe and Japan.
The Fed’s October policy statement noted that both the labor market and the inflation outlook were improving.
Markets are currently expecting the U.S. central bank to start raising rates sometime around September 2015. In contrast, the European Central Bank and the Bank of Japan are expected to continue monetary easing in order to shore up growth and inflation.
ECB President Mario Draghi said earlier this week that it could expand its asset purchase program to include government bonds.
The dollar was at seven year highs against the yen after Japanese Prime Minister Shinzo Abe delayed a planned sales tax hike and called early elections.
USD/JPY hit highs of 117.65, the most since October 2007 and was last at 117.51, 0.56% higher for the day.
On Tuesday Prime Minister Abe announced plans to delay a sales tax hike due to take place next year after an increase in April played a part in pulling Japan into a recession.
He also called elections for December, to seek a fresh mandate for his economic policies, which call for a weaker yen.
The decision came after data showed that Japan’s economy fell back into recession in the third quarter, contracting by an annualized 1.6% after a 7.3% contraction in the previous quarter.
The yen showed little reaction after the Bank of Japan left monetary policy on hold on Wednesday, as widely expected.
The US dollar index, which tracks the performance of the greenback against a basket of six major currencies, was steady at 87.66, holding below last week’s more than four-year highs of 88.36.