Dollar at seven-week low as Fed minutes show scant support for rate rise

The dollar hit a seven-week low against a basket of major currencies on Thursday, after minutes from the Federal Reserve’s July meeting 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 Federal Open Market Committee were generally upbeat about the U.S. 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 U.S. rates as soon as September.

The dollar’s index against a basket of six major currencies .DXY 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 $1.1320 EUR=, having hit a 7-week high of $1.13285 while even the struggling British pound was trading well above $1.30 GBP=D4.

“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,” said Antje Praefcke, currency strategist at Commerzbank. “The dollar will enter the weekend on a weak footing.”

The dollar JPY= shed 0.4 percent to 99.85 yen, 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 will act appropriately if there are any excessive moves in the forex market.

Sterling rose to trade at $1.3065, with the focus on retail sales data due at 0830 GMT (4.30 a.m. ET). The data is expected to show a 0.2 percent rise in July after a sharp drop in June. [ECONGB]

“The pound has been well supported on the back of this week’s better than expected labor and inflation data,” Credit Agricole analysts said in a note. “In both cases it should still be noted that data is rather backward looking. Unless retail sales data indicates improving conditions, sterling is likely to remain capped.”

Source: Reuters