- Dollar index falls for third session amid easing oil prices
- Central banks set to hold interest rates amid Mid-East conflict
- Japan PM set to discuss investment, tariffs with Trump
TOKYO, March 18 (Reuters) - The U.S. dollar lost ground on Wednesday as easing crude oil prices allowed for a glimmer of risk appetite ahead of a slate of central bank policy meetings.
The currency weakened against the yen which pulled back from levels where traders had braced for Japanese intervention, ahead of a meeting in Washington between U.S. President Donald Trump and Japanese Prime Minister Sanae Takaichi.
It also reversed course against the euro during the day, with the single currency edging up for a third session ahead of the start of a two-day meeting at the European Central Bank.
Still, the safe-haven greenback has gained overall since the U.S. and Israel attacked Iran almost three weeks ago.
While the war has seen oil become more expensive, prices fell more than $2 a barrel after Iraqi and Kurdish authorities agreed to resume oil exports via Turkey's Ceyhan port from Wednesday.
"With the rise in crude oil prices appearing to pause for the moment, it's not as though conditions have improved dramatically, but for now, markets across the board seem to be recovering somewhat," said Hirofumi Suzuki, chief foreign exchange strategist at Sumitomo Mitsui Banking Corp.
"In the case of USD/JPY, you could say it has moved a bit in the direction of yen strength."
The dollar index , which measures the greenback relative to six major peers, edged down fell 0.04% to 99.51, extending its losing streak to a third session. The euro was up 0.04% at $1.1543.
The Japanese yen strengthened 0.21% against the greenback to 158.64 a dollar. Sterling edged 0.1% higher to $1.3368.
The dollar reached a 10-month high at the end of last week as conflict in the Middle East and rising oil prices prompted investors to seek safety in U.S. assets.
With no sign of de-escalation, Brent futures prices have settled above $100 a barrel for four consecutive sessions.
"Even if the conflict settles into a prolonged stalemate ... equities could rebound, supporting commodity currencies such as the Australian dollar, while also prompting a rebound in the currencies of oil-importing economies such as the yen and the euro," said Mizuho Securities chief FX strategist Masafumi Yamamoto and market analyst Masayoshi Mihara in a report.
The Australian dollar strengthened 0.21% versus the greenback to $0.7117 on Wednesday and New Zealand dollar rose 0.19% to $0.5868.
"That said, we see limited downside from here in USD/JPY, partly because the Takaichi administration would likely favour a weaker yen," Mizuho analysts said.
The prime minister is due to depart on Wednesday for her meeting with Trump. Besides the U.S.-Israeli war with Iran, Takaichi is likely to discuss a second round of Japanese investment in the U.S. as part of tariff deals.
Japanese public broadcaster NHK reported that the two nations are set to deliver a joint statement agreeing investment of as much as 11 trillion yen ($69.30 billion). The dollar showed little movement against the yen after the report.
In central banks, the U.S. Federal Reserve will announce its policy decision on Wednesday, with the ECB, Bank of England and Bank of Japan following a day later.
They are all widely expected to maintain interest rates. Instead, traders will be looking for commentary about inflation and economic outlook amid war in the Middle East.
In cryptocurrencies, bitcoin fell 0.50% to $74,184.63. Ethereum rose 0.04% to $2,329.46.
($1 = 158.7300 yen)
Reporting by Rocky Swift and Satoshi Sugiyama; Editing by Sam Holmes, Thomas Derpinghaus and Christopher Cushing
Source: Reuters