Dollar retreats ahead of Fed minutes, Bernanke
NEW YORK (JULY 10) The U.S. dollar fell on Wednesday, a day after a popular dollar index scored a three-year high, as investors awaited minutes of the Federal Reserve’s last policy meeting and a speech by Fed Chairman Ben Bernanke for further insight into the central bank’s time frame for slowing the pace of its monetary stimulus.
The ICE dollar index /quotes/zigman/1652083 DXY -0.54% , which measures the U.S. unit against six other major currencies, fell to 84.295 versus a level of 84.598 in North American trade late Tuesday.
The release of the minutes of the June 18-19 meeting of the Federal Open Market Committee at 2 p.m. Eastern and Bernanke’s speech after the close of Wall Street trading “could be key in either cementing or undermining market expectations with respect to the chances of Fed tapering the quantity of its monthly asset purchases in September,” said Jane Foley, senior currency strategist at Rabobank International.
Economists will scour the minutes to gauge the individual views of Fed policy makers. The Fed has been purchasing $85 billion in government and mortgage bonds each month in an effort to keep interest rates low and boost the economy.
But Bernanke affirmed in a news conference following the June meeting that the Fed could begin to scale back those purchases later this year. Increased expectations for tapering have undercut bonds, sending yields higher and lifting the dollar.
“Given the risk of unsettling markets, it is likely that even when the Fed [begins] to taper QE that Bernanke will continue to evoke the use of dovish rhetoric and forward guidance in order to achieve a more moderate market impact. This may mean that Bernanke could disappoint the U.S. dollar bulls” in his speech later Wednesday, Foley said.
The dollar, meanwhile, dropped versus the yen with the Bank of Japan due to wrap up its two-day policy meeting Thursday.
