The US dollar maintained its losses on Thursday as the minutes from the Federal Reserve’s November meeting backed up the idea that the central bank will shift gears and hike rates in smaller chunks from its December meeting.
The much-anticipated summary from the Nov. 1-2 meeting revealed that officials were mostly comfortable that they could now move in smaller stages, with a 50 basis point rate increase probable next month following four consecutive 75 basis point rises.
“The Fed will be happy to move rates by 50 basis points in December and 25 basis points from the first meeting next year,” said Niels Christensen, chief analyst at Nordea, Noting that the Fed will continue to believe it has to do more to reduce inflation.
He also added “As long as the Fed sees a stronger labor market, they don’t have a big concern about tightening,”
After falling 1.1% on Wednesday, the dollar index, which compares the value of the dollar to six important peers, was little changed at 105.93.
The Fed has raised interest rates to levels not seen since 2008, but somewhat cooler-than-expected consumer pricing data in the United States has fueled predictions of a more gradual pace of increases.
As a result of these expectations, the dollar index fell 5.1% in November, on pace for its worst monthly performance in 12 years.
“There are not that many dollar buyers around these days after the correction higher in euro-dollar in the first half of November,” Nordea’s Christensen added.
The reports of the European Central Bank’s November meeting were due to be released at 1230 GMT in Europe.
Sterling recently traded at $1.2086, up 0.3% on the day, while the euro was up 0.2% at $1.0415. On Wednesday, the pound increased 1.4% after preliminary British economic activity data beat forecasts, though it still indicated that a contraction was in progress.
The euro gained 0.3% versus the Swedish krona after Sweden’s Riksbank lifted interest rates by 75 basis points, as predicted by a Reuters poll.
Rising coronavirus infections in China have caused cities all around the country to impose tighter restrictions, raising investor concerns about the economy and reducing risk appetite. On Thursday, China announced a record number of illnesses.
The yuan strengthened after Chinese state media cited the cabinet as saying that Beijing will employ timely reductions in the reserve requirement ratio (RRR) for banks together with other monetary policy instruments to maintain a reasonable level of liquidity.
The Japanese yen was one of the greatest gainers versus the US dollar, rising 0.6% to 138.77.
The Australian dollar increased by 0.2% to $0.6747, while the New Zealand dollar increased by 0.1% to $0.6249.
Due to Thanksgiving, U.S. markets will be closed on Thursday, and liquidity levels may be lower than usual.
SOURCE: Yahoo News
