U.S. Dollar Losses Momentum on Federal Reserve Minutes

On Thursday, the U.S. dollar lost its momentum following the double-whammy of dovish-looking minutes of the last policy meeting of Federal Reserve and U.S. President Donald Trump threats of new tariffs on imported vehicles.

Meanwhile, the euro was hampered by alarms over an economic slowdown in the currency bloc and political risks in Italy. The euro is standing near a six-month low against the U.S. dollar and a nine-month low against the yen.

The dollar, on the other hand, measured against a basket of six major currencies, has stepped back to 98.865 from its five-month high of 94.195 hit just before the release of the Federal Reserve’s minutes.

Most of the policymakers thought that another interest rate increase would be warranted after the minutes showed that the Federal Reserve would be tolerating inflation increasing above its goal.

“The minutes suggested the Fed is not in a hurry to raise interest rates. The U.S. stock markets seem to like that they were not too hawkish,” Ayako Sera, a market economist, stated.

The minutes also showed that the board members have agreed to make a small adjustment in its policy implementation by increasing the interest rates on its additional reserves by 20 basis points.

Their said conversation came as a surprise to the market players and helped to put down the short-term U.S. interest rates and bond yields.

“This means the effective interest rates in the future have shifted five basis points lower over a long period of time. In other words, we could even say the Fed today cut rates by five basis points,” a chief fixed income strategist, Toru Yamamoto, said.

Against Japanese yen, the U.S. dollar dropped nearly 0.6 percent to 109.45 yen, just after it fell 0.73 percent yesterday, its largest fall in almost three months.  It was last seen at 109.61 yen, falling 0.4 percent on the day.

The euro also bounced back a little to $1.1729 after it reaching a six-month low of $1.1676 on Wednesday. However, the common currency was held back political and economic doubts in Europe.

Meanwhile, the safe-haven Swiss franc increased 0.2 percent to 0.9943 franc to the dollar.

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