The U.S. dollar is trading lower today as the Federal Reserve minutes loom and investors are taking a cautious stance ahead of this key risk event on Wednesday.

The Fed will release minutes of its July meeting which many hope will offer clues as to whether policy makers will start reduce their $85 billion of monthly bond purchases as soon as September. These stimulus measures tend to have a weakening effect on the dollar, so a reduction will increase demand for the USD.

In the past three days investors have been reducing their participation in the currency markets resulting in low volumes and exaggerated moves as traders are readjusting their positions.

The dollar hit a two-month low against the euro and also fell against the yen and the Swiss franc. Any dip in the dollar offers a buying opportunity, especially against these currencies.

EURUSD opened in Europe at $1.3352 and rose over 50 pips to $1.3045, the highest since June 19.

GBPUSD also hit a fresh two-month high at $1.5678.

USDCHF dipped to as low as 0.9179 while USDJPY reached down to 96.96 before steadying.

The only pairs where the USD gained were versus the Aussie and Kiwi which both underperformed after comments from the central banks of both countries.

The Reserve Bank of Australia minutes released today of the August 6 meeting signaled further interest-rate cuts remain a possibility.

AUDUSD extended the Asian session decline from $0.9131 and slid to $0.9026 in early European session trading before pulling back to $0.9075.

The kiwi tumbled 1.1 percent after Reserve Bank of New Zealand Governor Wheeler announced lending restrictions for houses and said the currency is “over-valued relative to what would be sustainable long-term.”

In reaction to these comments the NZDUSD tumbled to $0.7951 in European trading from $0.8074 in Asia.

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