By Hideyuki Sano

TOKYO (Reuters) – The euro staggered near a three-month low against the dollar on Wednesday after disappointing German data raised doubts about the strength of the economic recovery, while the dollar awaited the Federal Reserve’s minutes from its last policy meeting.

The single currency changed hands at $1.1820, having touched a three-month low of $1.1806 on Tuesday. Against the yen, it fell to 130.81 yen, edging near its two-month low of 130.05 set on June 21.

Investor sentiment in Germany, the euro zone’s biggest economy, fell sharply in July, though it remained at a very high level, the ZEW economic research institute reported.

Even more worrying, separate data showed orders for German-made goods posted their sharpest slump in May since the first lockdown in 2020, hurt by weaker demand from countries outside the euro zone.

Other risk-sensitive currencies took a hit after oil prices abruptly plunged as OPEC producers cancelled a meeting when major players were unable to come to an agreement to increase supply. [O/R]

The Australian dollar traded at $0.7490, giving up gains made on Tuesday after the Reserve Bank of Australia took its first step towards tapering its stimulus.

The RBA announced a third round of its quantitative easing programme albeit at a size smaller size than the previous two rounds, while retaining the April 2024 bond for its three-year yield target of 0.1%.

Cautious risk sentiment underpinned the yen, which strengthened to 110.645 yen per dollar, extending its rebound from its 15-month low of 111.64 touched last week.

The yen’s gains came as U.S. bond yields fell to their lowest levels since February after data signalled the service sector expanded at a slower pace.

Yields have fallen in recent weeks also as many speculators who had bet that rising inflation could prompt the Federal Reserve to tighten its policy soon have been forced to bail out of their positions.

Minutes from the Fed’s June policy meeting due later on Wednesday, however, could offer fresh hints on its policy outlook.

“Many people seem to think the Fed will drop hints on tapering in August, and will say in September that it is considered and it will be implemented in December. But I believe the Fed could move earlier than those timelines,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

“The important point is, the Fed did already raise their inflation forecast.”

Elsewhere, cryptocurrencies were in a holding pattern, with bitcoin little changed at $34,066 and ether at $2,308.

(Reporting by Hideyuki Sano; Editing by Shri Navaratnam)