Dollar higher after Fed minutes release
The dollar traded higher against the euro and other major currencies after the U.S. Federal Reserve release the minutes from its April meeting.
Meeting minutes show a Fed Open Market Committee with little concern about growth, even though they detailed a laundry list of weak spots that included industrial production, housing and investment. Gross domestic product grew just 0.2 percent in the first quarter—a number likely to be revised to a negative—while the Atlanta Fed is tracking second-quarter growth at just 0.7 percent.
Despite their mostly dismissive tone, FOMC officials nevertheless decided against increasing the committee’s benchmark interest rate, a nonmove telegraphed at the March meeting. They even removed language providing any indication of when a liftoff might occur.
The euro dropped 0.66 percent against the greenback to $1.1081, after trading at $1.1099 ahead of the release. The greenback also edged higher against the British pound. The U.K. currency traded down 0.12 percent against the dollar at $1.5497 after trading slightly higher ahead of the release.
The dollar also surged against the yen, trading at 121.39, up about 0.6 percent.
Earlier, the dollar hit a three-week high against the euro and a two-month peak versus the yen on Wednesday, extending a rebound rally underpinned by European Central Bank plans to frontload its quantitative easing program in a move to keep interest rates low.
“The ECB has taken the wind out of the euro’s sails,” said Mark McCormick, currency strategist at Credit Agricole in New York.
McCormick added the ECB’s plans have helped focus the market on consolidating the euro’s recent rally, especially as it approached $1.15 again.
Some analysts pointed to headlines about Greece as weakening the euro, but most said the biggest element was the sense that the past month’s 8 percent pullback has cleaned out many long-term bets on the dollar, leaving room for new action.
“Positions are a lot cleaner and that may well have opened the way to another push higher,” said Josh O’Byrne, a strategist with Citi in London.
“If this is the beginning of a dollar resurgence, then the Canadian dollar, Norwegian crown and rouble are interesting bets on the downside,” O’Byrne said.
Separately, five of the world’s largest banks on Wednesday were fined roughly $5.7 billion for manipulating financial markets. Four of them agreed to plead guilty to U.S. criminal charges over manipulation of foreign exchange rates while a fifth agreed to plead guilty to rigging benchmark interest rates.
Source: Reuters
