Latest News

Dollar cuts losses after Fed minutes

© Reuters. FILE PHOTO: A U.S. hundred dollar bill and Japanese 10,000 yen notes are seen in this photo illustration in Tokyo, February 28, 2013. REUTERS/Shohei Miyano

By Chuck Mikolajczak

NEW YORK (Reuters) – The dollar fell on Wednesday but pared losses after minutes released from the Federal Reserve’s December meeting showed the U.S. central bank may need to act more quickly in hiking interest rates to combat inflation.

Fed officials said the “very tight” U.S. labor market might warrant raising rates sooner than expected as well as reducing the bank’s overall asset holdings to tame high inflation, minutes of their Dec. 14-15 policy meeting showed.

The greenback weakened after a nearly 0.7% gain in the year’s first two sessions and a more than 2% increase since the end of October. It extended its decline earlier in the session following a much stronger-than-expected ADP (NASDAQ:ADP) National Employment Report.

Analysts cited the 96.40 mark in the dollar index as a technical level of resistance contributing to the currency’s softness on the day.

“The minutes almost never change anything. They may have reinforced a little bit the Fed’s intent on raising rates, but not very much,” said Joseph Trevisani, senior analyst at in New York.

The dollar had risen more than 2% since the end of October before Wednesday’s decline, as expectations have grown the Fed will begin to hike interest rates this year. Expectations for at least a 25 basis point hike are over 60%, according to the CME FedWatch Tool.

“It is going in the right direction, it is going where it should be going, so even if the dollar was off a little bit today I just don’t see how you are going to get away from the Fed’s intention.”

Following the release of the minutes, futures on the federal funds rate were pricing in about an 80% chance of a quarter-percentage point hike by the central bank at its March meeting.

The dollar index fell 0.164%, after dropping as much as 0.44% on the session, with the euro up 0.23% at $1.1311.

Despite the rapid spread of the Omicron variant, investors have increasingly viewed it as unlikely to derail the global economy or more aggressive actions by central banks, with studies indicating lower hospitalization rates. On Monday, the United States reported nearly 1 million new coronavirus infections.

The Japanese yen strengthened 0.07% versus the greenback at 116.06 per dollar, while sterling was last trading at $1.3559, up 0.20% on the day.

Sterling hit a fresh 2-month high versus the greenback at 1.3598 per dollar, its highest since Nov. 9, on growing expectations the Bank of England will raise interest rates as soon as next month.

Dollar cuts losses after Fed minutes

Disclaimer:Fusion Mediawould like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

You may also like

Leave a reply

Your email address will not be published.

More in Latest News