Currency trends Friday: Traders sell dollars in wake of dovish-sounding Fed minutes

U.S. five dollar currency note; taken September 2018.

The U.S. dollar faced further pressure on Thursday after minutes from the last U.S. Federal Reserve meeting reinforced the market’s view the central bank may be turning more dovish.

“The FOMC minutes did not help the dollar,” Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, said in a note on Thursday, U.S. time.

“The minutes weren’t dovish as some members saw the need for a rate hike possibly before the December meeting, but with little clarity on whether this meant a change to accommodate less hikes or more, investors continued to sell dollars,” Lien said.

But she added, “At the end of the day, even with the pickup in spending and the strong Black Friday/Cyber Monday sales, there’s no question that the momentum in the economy is slowing.”

The minutes of the last U.S. Federal Reserve meeting showed Fed officials were on track for another rate increase “fairly soon,” but also started debating when to pause the hiking cycle.

Comments from Fed chief Jerome Powell on Wednesday were also taken as dovish by the market.

Powell said that the central bank’s benchmark rate was “just below” where it estimated the “neutral” level would be. A neutral level would neither stimulate nor slow the economy. The comments, made in a speech Wednesday at the Economic Club of New York, were taken by market as a signal that the Fed would pause its hiking cycle as it marked a shift from his comments in October that rates were a “long way from neutral.”

Currencies

The U.S. dollar index, which measures the greenback against a basket of currencies, was at 96.79 at 7:04 A.M. SGT, off levels as high as 96.99 in Thursday’s session and as high as 97.48 on Wednesday, according to ICE futures data.

The 10-year U.S. Treasury note yield was at 3.029 percent at 8:46 A.M. SGT of levels as high as 3.043 percent and as low as 3.003 percent in Thursday’s session after touching levels as high as 3.075 percent earlier in the week, according to Tullett Prebon data.

Euro rallies

The euro/dollar was at 1.1393 at 8:49 A.M. SGT after trading in a 1.1347 to 1.1402 range on Thursday, according to DZHI data.

Lien said the euro got a fillip not only from a weaker U.S. dollar, but also from the European Commission denying reports that the U.S. might levy tariffs on European autos before the Christmas holiday.

The British pound/dollar was at 1.2783 at 8:50 A.M. SGT after trading in a 1.2754 to 1.2850 range on Thursday, according to DZHI data.

The dollar/yen was at 113.403 at 8:50 A.M. SGT after trading in a 113.17 to 113.632 range on Thursday, according to DZHI data.

The dollar/yuan was at 6.9418 at Thursday’s close after trading in a 6.9346 to 6.9470 range during the session, according to DZHI data.

The dollar/Singapore dollar was at 1.3697 at 8:51 A.M. SGT after trading in a 1.3688 to 1.3736 range on Thursday, according to DZHI data.

The dollar/Malaysian ringgit was at 4.1840 at 7:51 A.M. SGT after trading in a 4.1800 to 4.1940 range on Thursday, according to DZHI data.

The dollar/Indonesian rupiah was at 14,375 at Thursday’s close after trading in a 14,330 to 14,460 range during the session, according to DZHI data.

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