(Updates prices, adds Fed minutes)* ADP Employment surges past estimate* Dollar dips after strong start to 2022* Fed minutes due at 2 p.m. E
(Updates prices, adds Fed minutes)
* ADP Employment surges past estimate
* Dollar dips after strong start to 2022
* Fed minutes due at 2 p.m. ET (1900 GMT)
By Chuck Mikolajczak
NEW YORK, Jan 5 (Reuters) – The dollar fell on Wednesday but
pared losses after minutes released from the Federal Reserve’s
December meeting showed the U.S. central bank may need to act
more quickly in hiking interest rates to combat inflation.
Fed officials said the “very tight” U.S. labor market might
warrant raising rates sooner than expected as well as reducing
the bank’s overall asset holdings to tame high inflation,
minutes of their Dec. 14-15 policy meeting showed.
The greenback weakened after a nearly 0.7% gain in the
year’s first two sessions and a more than 2% increase since the
end of October. It extended its decline earlier in the session
following a much stronger-than-expected ADP National Employment
Report.
Analysts cited the 96.40 mark in the dollar index as a
technical level of resistance contributing to the currency’s
softness on the day.
“The minutes almost never change anything. They may have
reinforced a little bit the Fed’s intent on raising rates, but
not very much,” said Joseph Trevisani, senior analyst at
FXStreet.com in New York.
The dollar had risen more than 2% since the end of October
before Wednesday’s decline, as expectations have grown the Fed
will begin to hike interest rates this year. Expectations for at
least a 25 basis point hike are over 60%, according to the CME
FedWatch Tool.
“It is going in the right direction, it is going where it
should be going, so even if the dollar was off a little bit
today I just don’t see how you are going to get away from the
Fed’s intention.”
Following the release of the minutes, futures on the federal
funds rate were pricing in about an 80% chance of a
quarter-percentage point hike by the central bank at its March
meeting.
The dollar index fell 0.164%, after dropping as much
as 0.44% on the session, with the euro up 0.23% at
$1.1311.
Despite the rapid spread of the Omicron variant, investors
have increasingly viewed it as unlikely to derail the global
economy or more aggressive actions by central banks, with
studies indicating lower hospitalization rates. On Monday, the
United States reported nearly 1 million new coronavirus
infections.
The Japanese yen strengthened 0.07% versus the greenback at
116.06 per dollar, while sterling was last trading at
$1.3559, up 0.20% on the day.
Sterling hit a fresh 2-month high versus the greenback at
1.3598 per dollar, its highest since Nov. 9, on growing
expectations the Bank of England will raise interest rates as
soon as next month.
(Reporting by Chuck Mikolajczak; editing by Barbara Lewis and
Richard Chang)
www.lse.co.uk