Dollar stabilizes after sliding in knee-jerk reaction to Fed minutes

Dollar stabilizes

As the market reexamines the minutes of the Federal Reserve’s last policy meeting, which kept the possibility of a March rate hike in play, the dollar shifted away from overnight lows and steadied on Thursday.

The minutes of the Federal Reserve’s January 31 to February 1 gathering noted many policymaker stating it may be good to raise interest rates again ”fairly soon” if data regarding jobs and inflations proceed as expected.

This disappointed dollar bulls initially, who had hoped for a more hawkish tone after Federal Reserve Chair Janet Yellen said that waiting too long to raise rates again would be “unwise”. The dollar went down, as policymakers mentioned the downside economic consequences of a stronger dollar.

The greenback dropped to an overnight low of 112.905 in a knee-jerk reaction to the Federal Reserve meeting minutes but had recovered to 113.420 on early Thursday gaining 0.1 percent.

"Of chief interest to the market right now is whether the Fed can still raise rates in March, and the meeting minutes did not suggest that a hike next month is no longer a possibility," said senior forex strategist at IG Securities in Tokyo, on the dollar’s rise.

The euro was down 0.1 percent at $1.0548, having recovered frm a 1-1/2-month low of $1.0494 touched the previous day.

The dollar index, which measures the greenback against six major currencies recovered overnight losses and was up 0.15 percent at 101.380. It had moved between a one-week high of 101.720 and a low of 101.170 on Wednesday.

The British pound changed slightly at $1.2450 after declining on Wednesday as data showed UK business investment fell in the fourth quarter of 2016, implying tougher economic times lie ahead.

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