The U.S. dollar extended its decline against its major rivals on Wednesday, as treasury yields fell and hopes for a rate hike by the Federal Reserve at September meeting faded following China's devaluation of the yuan.

The People's Bank of China set the daily reference rate at 6.3306 yuan per dollar, down 1.6 percent from 6.2298 per dollar on Tuesday.

The move to devalue the yuan for the second straight day has added to concerns about the Chinese economy as well as the possibility that it could start a currency war.

The yield on the benchmark 10-year Treasury note fell 2.12 percent, while that on the 30-year bond was down by 2.8 percent as investors rushed to safe-haven bonds. Yields move inversely to bond prices.

Markets now expects only a 40 percent chance for a rate hike at September, which lesser than bets of 54 percent seen a few days ago.

Speaking at workforce development and reinvention in the Rochester Economy, New York Fed President William Dudley said that monetary policy can help labor market recovery, but it alone resolve skill mismatches that may exist in the economy.

"Workers who can build skills and remain nimble can do very well in today's economy, while those who can't are much more likely to fall into lower-paying jobs and get stuck there," he added.

The greenback has been lower in the European session.

In New York deals, the greenback depreciated to an 8-day low of 123.89 against the Japanese yen, off early more than 2-month high of 125.28. The pair was worth 125.11 when it ended yesterday's trading. The greenback is likely to find support around the 122.00 mark.

The greenback fell to an 8-day low of 0.9707 against the franc and more than a 4-week low of 1.1192 against the euro, coming from its early highs of 0.9890 and 1.1025, respectively. Continuation of the greenback's downtrend may take it to support around 0.96 versus the franc and 1.13 against the euro.

The greenback slipped to a 6-day low of 1.5630 against the Sterling, and held steady thereafter. This may be compared to an early 2-day high of 1.5535. At Tuesday's close, the pair was trading at 1.5575. On the downside, the greenback is likely to challenge support around the 1.575 level

The greenback dropped to 12-day lows of 1.2950 against the loonie and 0.6640 against the kiwi, reversing from its early high of 1.3157 and a 6-year high of 0.6469, respectively. The next possible support for the greenback is likely seen around 1.28 against the loonie and 0.68 against the kiwi.

The greenback, which advanced to more than a 6-year high of 0.7216 versus its Australian unit in the early Asian session, reversed direction and was trading at 0.7387. If the greenback continues slide, 0.745 is possibly seen as its next support level.

Looking ahead, U.S. monthly budget for July is set to be announced in the New York session.

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