Dollar up, bond yields fall as Fed rate hike appears further out

Minutes show many Fed officials not in favour of raising rates in June

The dollar rose and US Treasury yields fell on Wednesday after minutes from the latest Federal Reserve meeting bolstered expectations that US interest rates will remain near zero until later in 2015.

The minutes, released ahead of a much anticipated speech on Friday by Fed Chair Janet Yellen, showed that many officials at the April 28-29 meeting believed it would be premature to raise rates in June. Officials were concerned about soft consumer spending, though most Fed members expect the US economy to pick up pace after a slowdown in the first quarter.

US short-term interest-rate futures contracts rose modestly as traders had already priced in the unlikeliness of a June rate hike.

Traders continue to see a 59% chance the first Fed hike will come in December, based on CME FedWatch data. Out of 62 economists polled by Reuters, 50 expect the Fed to hike rates in the third quarter.

"They didn't give much tangible evidence that they were going to do anything different than what the market was already prepared for," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

US stocks ended marginally lower. The Dow Jones industrial average ended off 26.99 points, or 0.15%, to 18,285.4, the S&P 500 fell 1.98 points, or 0.09%, to 2,125.85, and the Nasdaq Composite gained 1.71 points, or 0.03%, to 5,071.74.

The dollar index of major currencies traded against the greenback was last up 0.35%, as the euro slid to two-week lows on a Greek official's warning that the country may miss a debt repayment.

The euro last traded off 0.5% against the dollar at $1.1098 after touching a low of $1.1063.

The dollar was last ahead 0.5% against the Japanese yen to over 121 yen, a level not seen for two months.

Buoyant US Treasuries inched up further as a June rate hike grew less likely. Safe-haven buying had already lifted the market on worries Greece may be unable to make a 300 million euro repayment to the International Monetary Fund on June 5.

The benchmark 10-year Treasury last yielded 2.2497%, reflecting a price gain of 3/32.

Crude oil prices rose after government data showed that US crude stocks fell for the third straight week. In the previous session, oil slid 3%.

Brent jumped 1.5% to $64.97 a barrel, while US crude settled up 1.7% to $58.98. Both shed more than $2 a barrel on Tuesday.