Dollar falls against euro ahead of FOMC minutes
New York (Apr 9) The dollar fell against the euro Wednesday ahead of the latest minutes from the Federal Reserve, with investors on the lookout for what the central bank may say about the timing of the first interest-rate hike.
The euro increased to $1.3824 from $1.3797 on Tuesday, remaining at its highest level since late March for the second session.
The euro has rallied back to the $1.38 level amid a slew of comments from European Central Bank officials about the potential for quantitative easing. ECB President Mario Draghi said Thursday the bank discussed quantitative easing and other nonstandard measures at its last meeting, but maintained that medium-term inflation expectations remain “firmly anchored.” The ECB targets inflation of just less than 2% in the medium term. Read: Draghi talks QE, but counts on Easter Bunny
The ECB has been making “empty threats” for about a year and a half, excluding the unexpected rate cut in November, said Andrew Dilz, a currency trader at Tempus, Inc.
“The euro bulls are holding steady,” he said. “I don’t think we’re going to see the euro weaken below $1.37 until we see some sort of action.”
The dollar was little changed at ¥101.82 versus ¥101.79 late Tuesday.
The ICE dollar index, a gauge of the greenback’s strength against six rivals, was at 79.640 versus 79.759. The WSJ Dollar Index, an alternate measure of dollar strength, was at 72.80 versus 72.88 late Tuesday.
The currency moves came ahead of the minutes from the Federal Open Market Committee’s March meeting, which will be closely watched for further clarity on the Fed officials’ stance on monetary tightening . Since Fed Chairwoman Janet Yellen said the central bank may hike interest rates six months after ending its quantitative-easing program, market participants have been speculating about whether higher rates could be on the cards for the first half of 2015.
Most people expected the dollar to broadly rally after the start of tapering, but the greenback has been hurt by a stuttering economy, worsened by the harsh winter, according to Farhan Ahmad, a trader at TradeNext.
The pound rose to $1.6761 from $1.6749, while the Australian dollar traded at 93.62 U.S. cents versus 93.60 U.S. cents
