Dollar Bounces Back After Federal Reserve Minutes Suggest Continued Restrictive Interest Rates
The dollar has experienced a modest rebound after hitting a 2-1/2 month low, following the release of the Federal Reserve’s meeting minutes. The minutes indicated that interest rates would likely remain restrictive for an extended period of time, ending speculation about further rate hikes. Analysts noted that while the rate-hike cycle may be over, Fed officials agreed to raise rates if inflation control stagnated, leaving room for potential tightening. Market expectations now point to the Fed holding rates at its December meeting, with a 28% chance of a rate cut as early as March next year.
The dollar index, which measures the greenback against a basket of major currencies, rose by 0.1% to 103.68. This recovery comes after the index hit its lowest level since August on Tuesday. However, November has been a challenging month for the dollar, as it is currently on track for its largest monthly decline in a year with a drop of about 2.8%.
The minutes released by the Fed have brought some relief to investors who were eager to capitalize on the uncertainty before the U.S. Thanksgiving holiday. Additionally, high U.S. Treasury yields, which have bolstered the dollar, have started to retreat from multi-year highs reached in October, as concerns grow over a slowdown in U.S. inflation that occurred during the same month.
The euro, which saw a surge against the dollar on Tuesday and reached its highest level since mid-August, is now sitting at $1.0899. Similarly, the pound remains unchanged at $1.2534, not far from the two-month high of $1.2558 achieved the day before.
Looking at Asian currencies, the Japanese yen weakened by 0.3% to 148.81 per dollar after touching a two-month high of 147.155 on Tuesday. While speculation suggests that the Bank of Japan may exit from negative interest rates early next year, analysts believe the risk of intervention has diminished, allowing the yen to stabilize.
Meanwhile, in the cryptocurrency market, Bitcoin rebounded by 2% to $36,468 after a 4.5% decline when Binance chief Changpeng Zhao announced his intention to step down and plead guilty to breaking U.S. anti-money laundering laws. This comes as part of a $4 billion settlement resolving a years-long investigation into the world’s largest crypto exchange.
Experts anticipate that the Bank of Japan is moving closer to ending its negative interest rate policy, with over 80% of economists in a Reuters poll predicting a policy shift next year. Such a move would signal the central bank’s intention to gradually exit its controversial monetary settings.
As traders and investors analyze the recent Fed minutes, the dollar is facing a critical juncture, with hopes of potential growth in the coming months.
