Dollar Rebounds from 2-1/2 Month Low After Fed Minutes
Dollar Rebounds from Recent Low
The dollar rebounded from a 2-1/2 month low on Wednesday as the minutes from the Federal Reserve’s last meeting hinted that interest rates would likely remain restrictive for some time, even as the rate-hike cycle appeared to be over.
Fed Minutes Reveal Careful Approach
The Fed minutes showed the central bank would proceed “carefully” and that “all participants judged it appropriate to maintain” the current rate setting.
Rate Hike Speculation
Fed officials agreed they would only raise interest rates if progress in controlling inflation faltered, reiterating recent comments by policymakers that left the door open for more tightening even as markets have moved to price rate cuts from early next year.
Market Speculation and Currency Performance
Markets are all but certain that the Fed will hold rates at their December meeting, while pricing in about a 27% chance of a rate cut as early as March, according to CME’s FedWatch Tool. Analysts also said market participants were eager to take money off the table before liquidity fizzles out before the U.S. Thanksgiving Holiday.
Impact on Currency Markets
The , which measures it against a basket of currencies, was 0.2% higher at 103.78, pulling away from its lowest level since the end of August at 103.17 it touched on Tuesday. The index is down about 2.6% in November and on course for its worst monthly performance in a year.
Yield Trends and Currency Movements
High U.S. Treasury yields, which have buoyed the dollar, have also tumbled from multi-year highs hit in October as investors ramp up bets that the Fed has finished increasing rates following a slowdown in U.S inflation in the same month. Treasury yields slipped again overnight, with the yield on the benchmark 10-year note last at 4.4003%
Impact on Other Currencies
The euro last sat at $1.0894 after rising to $1.09655 on Tuesday, its highest against the dollar since mid-August. Sterling was down 0.2% at $1.2518, not far from a two-month high of $1.2558 touched on Tuesday.
Global Currency Trends
The Japanese yen was off 0.6% to 149.265 per dollar, after hitting a two-month high of 147.155 on the dollar on Tuesday. More than 80% of economists in a Reuters poll said the Bank of Japan would end its negative interest rate policy next year, with more convinced the central bank is getting closer to exiting its controversial monetary settings.
Cryptocurrency Market Movement
In cryptocurrencies, bitcoin was up 2.3% at $36,569 a day after prosecutors said Binance chief Changpeng Zhao will step down and plead guilty to breaking criminal U.S. anti-money laundering laws as part of a $4 billion settlement resolving a years-long investigation into the world’s largest crypto exchange.
