Dollar firms on lingering hopes for June rate hike inspired by Fed minutes
The dollar firmed Thursday after the minutes of the Federal Reserve’s last policy meeting showed a split over the timing of an interest-rate increase, keeping chances of a June hike alive.
The dollar bought 120.28 yen in Tokyo afternoon trade, up from 120.14 yen in New York late Wednesday.
According to the minutes of the March 17-18 meeting of the Federal Open Market Committee, “several participants” thought conditions were right for a June hike in the federal funds rate, which has been stuck near zero since late 2008.
Others deemed the economy would not be able to weather a rise until later in the year, while “a couple” said liftoff would remain unlikely until 2016.
Differences of views within the Fed countered an earlier market conviction that a June hike was now off the table.
“The FOMC minutes show there were a few supporters for a June rate hike,” said Naohiro Nomoto, an associate for currency trading at Bank of Tokyo-Mitsubishi UFJ in New York.
“There seems to be serious talk of a June increase, so there was some dollar buying amid the hawkish tone,” he told Bloomberg News.
National Australia Bank said markets were none the wiser on the timing for the US rate rise.
“In short, there’s a wide divergence of views within the Fed, no consensus on lift-off timing,” it said in a note.
“The final arbiter will be the data, recent data argued for delayed rate lift-off. A June 18 rate lift-off is now being priced as quite a slim chance,” it said.
The euro bought US$1.0764 and 129.40 yen against US$1.0780 and 129.52 yen in U.S. trade, after data from the eurozone’s biggest economy Germany showed factory orders fell again in February.
The dollar was mixed against other Asia-Pacific currencies.
It declined to SG$1.3561 from SG$ 1.3564 on Wednesday, to 62.24 Indian rupees from 62.30 rupees and to 12,917.50 Indonesian rupiah from 12,972.50 rupiah.
It rose to 1,092.15 South Korean won from 1,090.97 won while remaining unchanged at 44.47 Philippine pesos and 32.54 Thai baht.
The Australian dollar bought 76.89 U.S. cents, down from 76.96 cents, while the Chinese yuan was 19.39 yen, up from 19.34 yen.