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Dollar bounces after Fed minutes revives tapering discussion

Dollar bounces after Fed minutes revives tapering discussion

FILE PHOTO: Bundles of banknotes of U.S. Dollar are pictured at a currency exchange shop in Ciudad Juarez, Mexico January 15, 2018. REUTERS/Jose Luis Gonzalez

TOKYO: The dollar bounced off three-month lows against European currencies on Thursday after minutes from the Federal Reserve's last policy meeting revealed there was more talk of tapering their bond purchase than investors had thought.

In the Fed minutes, several policymakers said that a discussion about reducing the pace of asset purchases would be appropriate "at some point" if the economic recovery continue to gain momentum.

That surprised investors given Fed Chair Jerome Powell had said right after that meeting last month that it is not time yet to begin discussing any change in policy.

"The minutes contained wordings that appear to seek to start discussion on tapering at an earlier timing than expected," said Takafumi Yamawaki, head of fixed income research at JPMorgan.

"If the next jobs data due on June 3 is strong, markets will start bracing for the Fed making a specific mention on tapering at its next meeting in June."

The euro slipped to US$1.2174 from a three-month high of Wednesday's US$1.2245.

The dollar rose to 109.21 yen from a one-week low of 108.575 yen touched on Wednesday.

The British pound slipped to US$1.4117 from above US$1.42 earlier this week.

The dollar's index bounced back from Wednesday's three-month low to 90.209.

The dollar has been declining over the past few weeks as key Fed officials have repeatedly said they were not ready to discuss reducing stimulus, judging spikes in inflation would be transient.

"It is worth noting that the FOMC Minutes predate the latest CPI and payroll/earnings numbers, so the fears of the minority on the FOMC are likely to have become a little more acute since the April meeting," said Tapas Strickland, director of economics, markets at RBA in Sydney.

The Fed minutes lifted U.S. bond yields a tad, with the 10-year Treasuries yield at 1.671per cent, compared with around 1.65per cent just before the release of the minutes.

Cryptocurrencies were volatile after suffering one of their biggest losses on Wednesday in the wake of China's decision to ban financial and payment institutions from providing digital currency services.

Bitcoin last traded down 3per cent at US$35,654, having fallen to as low as US$30,066 on Wednesday, which represented a whopping 54per cent fall from its record high hit just over a month ago.

Ether plunged more than 10per cent to as low as US$2,168 after 22.8per cent fall on Wednesday, its biggest daily fall since March 2020.

(Reporting by Hideyuki Sano; Editing by Sam Holmes)

Source: Reuters

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