Dollar Down, But Fed Minute’s Hawkish Tone Caps Losses

© Reuters.

By Gina Lee

AiVIF.com – The dollar was down on Thursday morning in Asia, but trading near a five-year high against the yen. The U.S. Federal Reserve’s hawkish tone in the minutes from its latest meeting contrasted with the dovish approach taken by its Japanese counterpart.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged down 0.14% to 96.737 by 11:13 PM ET (4:13 AM GMT). However, the index remained close to Wednesday's high of 96.938, its strongest level since July 2020.

The USD/JPY pair inched down 0.04% to 115.36, a level not hit since January 2017.

The AUD/USD pair edged up 0.12% to 0.7204 and the NZD/USD pair inched up 0.04% to 0.6876.

The USD/CNY pair inched down 0.05% to 6.3885 and the GBP/USD pair edged up 0.16% to 1.3887.

The Fed indicated that it could pick up the pace on its asset tapering program, and hike interest rates quicker than expected if high inflation persists, in its minutes released on Wednesday.

San Francisco Fed President Mary Daly also said on Wednesday that she could see a case being made to speed up asset tapering.

"The U.S. economy retained its titanium status," buoying the dollar, National Australia Bank director of economics Tapas Strickland said in a note.

"Slightly hawkish comments from the normally dovish Daly was also a factor."

With U.S. markets closed for a holiday on Thursday, the focus is now on the minutes from the European Central Bank (ECB)’s latest meeting, due later in the day. ECB president Christine Lagarde will also give a speech at an ECB legal conference on the same day, and board members Frank Elderson and Edouard Fernandez-Bollo will also participate in the conference.

Investors are also looking ahead to whether the Bank of England (BOE) will raise interest rates in its next policy decision on Dec. 16. Investors were surprised when the central bank kept rates steady at its last policy decision earlier in the month, and look to comments from BOE governor Andrew Bailey at Cambridge University later in the day for clues.

In Asia Pacific, the Bank of Korea hiked its interest rate to 1% as it handed down its policy decision earlier in the day.