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Dollar gains ahead of Fed meeting minutes

NEW YORK, Aug 17 (Reuters) – The U.S. dollar rose on Wednesday before the Federal Reserve released minutes of its July meeting, and the greenback briefly hit a session high against a basket of currencies after data showed US consumer spending was down. stable in July.

Bets that the US central bank will continue to raise rates aggressively to fight inflation have risen since last week, when weaker-than-expected inflation in July raised hopes that pressures on prices could be passed.

Fed officials are adamant they will continue to raise interest rates until high inflation is brought under control, and Wednesday’s release of the minutes of their July 26-27 policy meeting could highlight how aggressive they expect to be. Read more

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“Everyone is focused on – well, will we really see the Fed being in a position where they have to do more massive rate hikes and can the economy handle that, and right now the economy seems to be able to do it,” said Edward Moya, senior market analyst at OANDA in New York.

U.S. retail sales were flat in July as lower gasoline prices weighed on gas station revenues, but consumer spending appeared to be holding up, which could further ease fears that the economy is already in recession. Read more

Looser financial conditions as yields on benchmark 10-year Treasuries hold below 3% and credit and equity markets improve have also heightened speculation that the Fed may need to be more aggressive in raising rates to have an impact.

Fed funds futures traders are currently pricing in a 48% chance of a 50 basis point hike and a 52% chance of a 75 basis point hike.

The dollar index against a basket of currencies was up 0.27% on the day to 106.76. The euro fell 0.10% against the dollar to $1.0161.

The greenback gained 0.67% against the yen at 135.16.

The dollar is helped by expectations that the Fed will continue to raise rates at a faster pace than its peers.

The euro is also weighed down by economic concerns as the region faces an energy crisis sparked by Western sanctions against Russia following its invasion of Ukraine.

The New Zealand Dollar fell 0.87%, erasing earlier gains in volatile trading on what was likely profit taking during the initial move.

New Zealand’s central bank made its seventh consecutive interest rate hike on Wednesday and signaled a more hawkish tightening path over the coming months to rein in stubbornly high inflation, which briefly boosted the currency. Read more

The pound also faded after an initial jump on data showing consumer price inflation in Britain hit 10.1% in July, the highest since February 1982. read more

The British pound was last down 0.23% on the day at $1.2061.

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Currency rates at 9:34 a.m. (1:34 p.m. GMT)

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Additional reporting by Iain Withers in London Editing by Mark Potter

Our standards: The Thomson Reuters Trust Principles.

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