The dollar has found itself on backfoot since yesterday and investors have become mostly bearish after the Federal Open Market Committee has raised fears on the dynamics of future rate hikes. This allowed euro to climb back towards over a half-year high.
Fed policymakers disappointed the dollar bulls yesterday. The Federal Open Market Committee members agreed they should hold off raising interests rates until it becomes clearly visible that the economic slowdown seen In the first quarter was just transitory.
The minutes hasn’t ruled out the rate hike expected in June, but the the uncertainty regarding the long-term monetary policy pushed the dollar back to the levels seen at the beginning of the week, when it got hardly hit by U.S. political concerns centred on President Donald Trump. In effect, the dollar index, measuring its strength against a basket of major currencies dropped to 96.972.
Here’s what market analysts said about the minutes:
“The minutes, while leaving the door open for another rate hike weren’t as hawkish as some investors had been expecting – there had been speculation ahead of time that hawkish tones could be quite supportive for the dollar. I think some of those expectations were a bit disappointed following the minutes and we’ve seen the dollar ease off since. That’s also because it’s been quite vulnerable recently.” – said Alexandra Russell-Oliver, currency analyst at Caxton FX in London
Dollar’s weakening allowed the euro to climb once again. The common currency has been gaining since the beginning of the month thanks to a series of positive factors, such as easing of political uncertainty regarding the French election and upbeat euro zone data.
“The euro is resuming its advance with the dollar sagging on the Fed’s minutes. It has the momentum to surpass the $1.1300 mark and we could see the rise continue towards $1.1500,” said Daisuke Karakama, market economist at Mizuho Bank in Tokyo.
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