Dollar falls as investors see Fed minutes as less hawkish than feared

The U.S. dollar index was down on Wednesday, hitting its lowest level since Friday after minutes from the last U.S. Federal Reserve meeting suggested policymakers are not set on a particular pace of interest rate hikes.

According to the January meeting minutes released on Wednesday, Fed officials last month agreed that, with inflation widening its grip on the economy and employment strong, it was time to tighten monetary policy, but also that decisions would depend on a meeting-by-meeting analysis of data.

Strategists said the minutes suggested policymakers may not be as hawkish as investors feared.

"Members were not as aggressive as some had expected, which is being reflected in the modest sell-off of the dollar," said John Doyle, vice president of dealing at Monex USA in Washington.

"We are taking these minutes with a grain of salt anyway, as the meeting happened before the recent CPI and PPI data, which were considerably higher than forecast."

Earlier this week, St. Louis Fed President James Bullard reiterated calls for a faster pace of Fed rate hikes, and stronger-than-expected U.S. economic data including Wednesday's U.S. retail sales data have helped to underscore that view.

Those expectations have helped to give support to the dollar in recent sessions.

At the Fed's Jan. 25-26 meeting, policymakers agreed that it would "soon be appropriate" to raise the Fed's benchmark overnight interest rate from its near-zero level.

The dollar index was last down 0.3%, while the euro was up 0.2% at $1.1383. The U.S. dollar was down 0.4% against the Swiss franc and down 0.2% against the Japanese yen.

On the geopolitical front, the United States and NATO said Russia was still building up troops around Ukraine on Wednesday despite Moscow's insistence it was pulling back.

The Russian defense ministry said its forces were pulling back after exercises in southern and western military districts near Ukraine. The Russian rouble strengthened 0.73% versus the greenback to 75.14 per dollar.

Oil prices rallied earlier, and the Canadian dollar rose 0.33% versus the greenback to 1.27 per dollar.

Sterling was last trading at $1.3593, up 0.44% on the day. Data earlier showed UK inflation hit a nearly 30-year high of 5.5%.

The Bank of England has already raised interest rates twice since December, and financial markets expect a further rate rise on March 17 after the BoE's next meeting.

In cryptocurrencies, bitcoin was down 0.7% at $44,271.

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Currency bid prices at 3:28PM (2028 GMT)

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

Previous Change

Session

Dollar index

95.7290 96.0070 -0.28% 0.069% +96.0640 +95.6770

 

Euro/Dollar

$1.1383 $1.1359 +0.22% +0.14% +$1.1396 +$1.1345

 

Dollar/Yen

115.4000 115.5950 -0.15% +0.26% +115.7800 +115.3550

 

Euro/Yen

131.37 131.28 +0.07% +0.81% +131.9000 +131.1200

 

Dollar/Swiss

0.9213 0.9253 -0.44% +1.00% +0.9260 +0.9208

 

Sterling/Dollar

$1.3593 $1.3542 +0.39% +0.52% +$1.3600 +$1.3532

 

Dollar/Canadian

1.2681 1.2717 -0.27% +0.30% +1.2725 +1.2665

 

Aussie/Dollar

$0.7202 $0.7151 +0.69% -0.94% +$0.7205 +$0.7144

 

Euro/Swiss

1.0487 1.0509 -0.21% +1.14% +1.0549 +1.0484

 

Euro/Sterling

0.8373 0.8388 -0.18% -0.32% +0.8402 +0.8366

 

NZ

Dollar/Dollar $0.6687 $0.6639 +0.74% -2.29% +$0.6691 +$0.6636

 

Dollar/Norway

8.8660 8.9025 -0.43% +0.62% +8.9120 +8.8575

 

Euro/Norway

10.0949 10.1061 -0.11% +0.83% +10.1447 +10.0896

 

Dollar/Sweden

9.2631 9.2840 +0.04% +2.72% +9.3155 +9.2465

 

Euro/Sweden

10.5450 10.5408 +0.04% +3.04% +10.5841 +10.5228

 

 

(Additional reporting by Gertrude Chavez-Dreyfuss and Elizabeth Howcroft; Editing by David Holmes, Barbara Lewis, Christina Fincher and Jonathan Oatis)