The US dollar, which were rising earlier today, declined after the Federal Reserve released the minutes of its latest policy meeting, talking about the statement that interest rates will remain low for a “considerable time” and voicing concern about the strength of the greenback.
The dollar demonstrated gains earlier during the current trading session but turned down after the Federal Open Market Committee released the minutes of its September meeting. The FOMC mentioned the wording for interest rates staying low for a long time, which were concerning market participants, especially dollar bulls:
The concern was raised that the reference to “considerable time” in the current forward guidance could be misunderstood as a commitment rather than as data dependent. However, it was noted that the current formulation of the Committee’s forward guidance clearly indicated that the Committee’s policy decisions were conditional on its ongoing assessment of realized and expected progress toward its objectives of maximum employment and 2 percent inflation, and that its assessment reflected its review of a broad array of economic indicators. It was emphasized that the current forward guidance for the federal funds rate was data dependent and did not indicate that the first increase in the target range for the federal funds rate would occur mechanically after some fixed calendar interval following the completion of the current asset purchase program.
Additionally, the concern was voiced about the current exchange rate of the dollar:
Over the intermeeting period, the foreign exchange value of the dollar had appreciated, particularly against the euro, the yen, and the pound sterling. Some participants expressed concern that the persistent shortfall of economic growth and inflation in the euro area could lead to a further appreciation of the dollar and have adverse effects on the U.S. external sector. Several participants added that slower economic growth in China or Japan or unanticipated events in the Middle East or Ukraine might pose a similar risk. At the same time, a couple of participants pointed out that the appreciation of the dollar might also tend to slow the gradual increase in inflation toward the FOMC’s 2 percent goal.
All in all, it looked like the Fed is not as hawkish as was considered before, making traders reduce their bullish bets on the US currency.
EUR/USD advanced from 1.2669 to 1.2739 as of 20:22 GMT today, rebounding from the intraday drop to 1.2623. GBP/USD opened at 1.6095 and fell to 1.6032 intraday but bounced to 1.6176 later. USD/JPY was up from 108.02 to 108.14 but retreated from the daily high of 108.74.
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