Dollar holds firm as hawkish Fed minutes keep rate risks in view
The dollar held close to an 18-month high in subdued Asian trading on Thursday, with the dollar index, which measures the greenback against a basket of six currencies, steady at 102.23 after gaining 0.3% on Wednesday. The index remains within a few pips of its strongest levels of the past year and a half.
The move followed minutes from the Federal Open Market Committee's September meeting, released on Wednesday, which signalled that policymakers at the US central bank viewed inflation as the biggest risk to their outlook. The committee voted unanimously to raise interest rates by a quarter of a percentage point at the meeting, but the minutes indicated divisions over the rationale for doing so. Westpac analysts wrote that the FOMC's minutes reinforced the hawkish tone accompanying the Fed's September rate hike, with most participants still viewing further tightening as appropriate and almost all seeing inflation risks tilted to the upside at the time of the meeting.
The minutes did little to shift expectations that the Fed will refrain from hiking at its meeting later this month. Fed funds futures are pricing an implied 19% probability of a 25-basis-point increase at the central bank's next two-day meeting ending 28 October, unchanged from a day earlier, according to CME Group's FedWatch tool.
Against the yen, the dollar was down 0.2% at 157.815 after data showed Japan's current account surplus stood at 4.062 trillion yen ($25.7 billion) in August, above economists' median forecast for a surplus of 3.19 trillion yen. The Australian dollar and its kiwi counterpart were both flat at $0.6960 and $0.5600 respectively, while the dollar was flat at 6.7015 yuan in offshore trade. The euro was unchanged at $1.1201 and the British pound was also flat at $1.3215.
In digital assets, bitcoin slipped 0.2% to $83,233.40, while ether nudged 0.1% lower to $2,571.07.
