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Global News & Trade Ideas

Dollar left wounded, Fed minutes and inflation in focus

TOKYO (Reuters) – The U.S. dollar teetered near a six-year low against its Canadian counterpart and nursed losses against European currencies as expectations that U.S. interest rates will remain low undermined the greenback.

The minutes from the U.S. Federal Reserve’s most recent meeting due later on Wednesday are expected to confirm that policymakers think a rate hike is still in the distance.

Investors will also be scrutinising consumer price data in Britain and Canada later in the trading day to determine how quickly major economies will be forced to rein in their accommodative monetary policy, which holds the key to the dollar’s trend in the medium term.

“I’m most concerned about the relative strength of inflation,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.

“The recent release of U.S. consumer prices printed quite high. If Britain and Canada remain below that level, it suggests the pace of normalisation in the United States will be faster. Dollar selling may not last much longer.”

Against the Canadian dollar, the greenback traded at C$1.2069, close to its weakest since May 2015.

The British pound bought $1.4188, which was near its strongest level since late February.

The euro was steady at $1.2223.

The dollar was little changed at 108.90 yen and 0.8976 Swiss franc.

Data last week showing U.S. consumer prices rose 4.2% in April from a year earlier was the fastest increase in more than a decade, which stunned investors.

Fed policymakers have said this is a temporary spike and reiterated that they expect interest rates to remain low, which has taken some steam out of the dollar, but not all are convinced by the Fed’s persuasion.

Expectations for policy tightening in Canada and the gradual lifting of coronavirus restrictions in Britain have lifted both countries’ currencies, but any suggestion of benign inflation could help the greenback recoup some of its losses.

Elsewhere, the Australian and New Zealand dollars held onto recent gains, but traders are closing watching commodity prices to determine whether the Antipodeans will break out of their recent trading range.

In the cryptocurrency market, bitcoin stabilised at $43,253, and rival digital currency ether traded at $3,409, but some jitters remain after China banned its financial institutions and payment companies from providing services related to cryptocurrency transactions.

Currency bid prices at 0017 GMT

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

Previous Change

Session

Euro/Dollar

$1.2223 $1.2224 +0.00% +0.05% +1.2225 +1.2221

Dollar/Yen

108.9050 108.9050 +0.04% +5.48% +108.9600 +108.8900

Euro/Yen

133.12 133.10 +0.02% +4.88% +133.1700 +133.0500

Dollar/Swiss

0.8976 0.8977 +0.00% +1.47% +0.8978 +0.8975

Sterling/Dollar

1.4188 1.4189 -0.01% +3.85% +1.4191 +1.4181

Dollar/Canadian

1.2069 1.2061 +0.07% -5.21% +1.2074 +1.2062

Aussie/Dollar

0.7788 0.7791 -0.03% +1.24% +0.7797 +0.7784

NZ

Dollar/Dollar 0.7237 0.7239 -0.01% +0.79% +0.7245 +0.7237

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Editing by Jacqueline Wong)