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US dollar dips from 4-1/2-month high after Fed minutes, last flat on the day

US dollar dips from 4-1/2-month high after Fed minutes, last flat on the day

FILE PHOTO: A U.S. dollar banknote is seen in this illustration taken May 26, 2020. REUTERS/Dado Ruvic/Illustration

NEW YORK : The dollar slipped from 4-1/2-month highs to trade little changed on Wednesday after minutes of last month's Federal Reserve meeting suggested there was no consensus about the timing of a tapering of its asset purchases under the U.S. central bank's quantitative easing program.

A reduction in debt purchases is typically positive for the dollar as it means the Fed will not be flooding the financial system with cash, increasing the greenback's value.

The minutes also said most participants "judged that the Committee's standard of 'substantial further progress' toward the maximum-employment goal had not yet been met."

This means that Fed policy would remain accommodative for some time, providing no support for the dollar.

"The market ... read the minutes as more dovish, leading to a quick uptick in indices and gold while Treasury yields and the U.S. dollar dipped," Matt Weller, global head of research at FOREX.com and City Index, wrote in a note sent after the release of the Fed comments.

"The focus now shifts to next week's Jackson Hole Symposium, where traders will closely scrutinize Fed Chairman Powell's keynote speech for any hints about the timing of a taper announcement," Weller added, referring to the Fed's annual economic symposium in Wyoming.

In afternoon trading, the dollar index was little changed at 93.137, sliding from a 4-1/2-month peak of 93.267.

The euro hit a session high versus the dollar after the release of the Fed minutes, rising from its lowest since April 1. It was last flat at US$1.1712.

The dollar earlier gained ground as nagging concerns about the global economy forced investors to seek safety in the greenback.

"We have a lot of macro risks at the moment surrounding markets," said Simon Harvey, senior FX market analyst at Monex Europe in London. "We have the risk of a slowing Chinese economy, rising Delta cases in the Asia-Pacific region, and slower growth generally."

In the United States, U.S. housing starts dropped 7.0per cent to a seasonally adjusted annual rate of 1.534 million units last month.

Against the yen, the dollar rose 0.2per cent to 109.85.

The commodity-linked currencies such as the Australian and New Zealand dollars trimmed losses versus the greenback after the release of the Fed minutes.

The Aussie dollar was last down 0.2per cent at USUS$0.7244, while the New Zealand currency fell 0.4per cent to USUS$0.6892.

A monthly fund manager survey by investment bank BoFA Securities showed that investors flipped to a net overweight on the dollar for the first time in nearly a year.

That shift in positioning was evident in more high-frequency weekly data as well with hedge funds ramping up their net long bets on the greenback to the most since March 2020.

While the dollar failed to draw any sustained strength from Fed Chair's Jerome Powell's comments and mixed U.S. data, markets shifted focus toward the Jackson Hole symposium where some expect the Fed to signal a change in direction with regards to its asset purchase plans.

In cryptocurrencies, bitcoin traded up 1.8per cent at US$45,504, not far from Saturday's three-month high of US$48,190. Ether stood at US$3,064, up 1.8per cent.

Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

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Currency bid prices at 3:07PM (1907 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 93.1150 93.1370 -0.01per cent 3.483per cent +93.2670 +92.9430

Euro/Dollar US$1.1713 US$1.1708 +0.06per cent -4.12per cent +US$1.1744 +US$1.1694

Dollar/Yen 109.8550 109.5900 +0.24per cent +6.32per cent +110.0600 +109.4800

Euro/Yen 128.68 128.28 +0.31per cent +1.39per cent +128.9400 +128.2300

Dollar/Swiss 0.9164 0.9150 +0.17per cent +3.61per cent +0.9196 +0.9128

Sterling/Dollar US$1.3762 US$1.3750 +0.07per cent +0.72per cent +US$1.3785 +US$1.3731

Dollar/Canadian 1.2634 1.2629 +0.06per cent -0.77per cent +1.2653 +1.2598

Aussie/Dollar US$0.7244 US$0.7256 -0.15per cent -5.82per cent +US$0.7269 +US$0.7229

Euro/Swiss 1.0735 1.0712 +0.21per cent -0.67per cent +1.0758 +1.0703

Euro/Sterling 0.8509 0.8522 -0.15per cent -4.79per cent +0.8533 +0.8506

NZ US$0.6893 US$0.6921 -0.40per cent -4.01per cent +US$0.6951 +US$0.6868

Dollar/Dollar

Dollar/Norway 8.8895 8.9105 -0.20per cent +3.56per cent +8.9265 +8.8805

Euro/Norway 10.4147 10.4352 -0.20per cent -0.50per cent +10.4548 +10.4064

Dollar/Sweden 8.7174 8.7564 -0.38per cent +6.36per cent +8.7645 +8.6981

Euro/Sweden 10.2133 10.2527 -0.38per cent +1.36per cent +10.2643 +10.2080

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Saikat Chatterjee in London; Editing by Alison Williams, Will Dunham, Kirsten Donovan and Gareth Jones)

Source: Reuters

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