The US dollar hit a seven-week low against a basket of major currencies yesterday, after minutes from the US Federal Reserve’s meeting last month showed policymakers were divided on raising interest rates in the near term.
The minutes released on Wednesday showed several policymakers said a slowdown in the future pace of hiring would argue against a near-term hike even as members of the rate-setting US Federal Open Market Committee were generally upbeat about the US economic outlook.
They outnumbered board members who anticipated that economic conditions would soon warrant tightening policy.
The minutes disappointed those who had bet that the Fed could be more hawkish, after New York Fed chief William Dudley said on Tuesday that the Fed could possibly raise US rates as soon as next month.
The US dollar’s index against a basket of six major currencies fell to 94.385, its weakest since June 24. The index last stood at 94.514, having lost 1.1 percent so far this week, as markets trimmed chances of rate rises this year amid subdued inflationary pressures.
The euro was 0.3 percent higher at US$1.1320, having hit a seven-week high of US$1.13285 while even the struggling British pound was trading well above US$1.30.
“The minutes paint a balanced picture and support the market’s view, according to which the likelihood of a small rate step by the end of the year is not even 50 percent,” Commerzbank currency strategist Antje Praefcke said.
“The [US] dollar will enter the weekend on a weak footing,” Praefcke added.
The US dollar shed 0.4 percent to ￥99.85, not far from a seven-week low of ￥99.55 set on Tuesday.
As the yen rose, Japan’s top currency diplomat repeated a warning to investors against pushing up the yen too fast, saying on Thursday that Japan would act appropriately if there are any excessive moves in the FOREX market.
The committee has left rates unchanged since voting in December last year to raise them from near-zero levels, marking the first increase in nearly a decade. Concerns about the prospects for global economic growth, sagging inflation expectations and mixed readings on the US economy have kept them sidelined.
St Louis Fed President James Bullard on Wednesday said that the central bank should be patient in raising interest rates with economic growth low.
“I like to move on good news about the economy,” Bullard said to reporters after a lecture at Washington University in St Louis.
“We have had some good jobs reports here, but on the other hand GDP growth is only 1.2 percent year over year, inflation is still below target, inflation expectations are low,” Bullard added.
For now, investors are expected to listen closely for additional clues on timing when Fed Chair Janet Yellen speaks on Friday next week at an annual symposium hosted by the Kansas City Fed in Jackson Hole, Wyoming.
Additional reporting by Bloomberg
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