Fed could hike “fairly soon,” but sees policy uncertainty as a stumbling block
The U.S. dollar fell against its major rivals on Wednesday, reversing an earlier advance as the latest commentary from the Federal Reserve indicated a desire to hike rates “fairly soon,” but expressed uncertainty about President Donald Trump’s fiscal policies.
The WSJ Dollar Index BUXX, -0.01% a measure of the U.S. dollar against 16 major currencies, was down 0.3% at 91.02, trading nears its lows of the session. The ICE U.S. Dollar Index DXY, +0.00% which gauges the buck against six rivals, fell 0.2% to 101.23, having previously risen by about that much.
Uncertainty over fiscal policies is a major stumbling block, according to the minutes from the Fed’s most recent meeting. Currency investors, in particular, have been betting that Trump’s policies on taxes and spending would stoke inflation and strengthen the dollar, a thesis that has contributed to the buck’s advance this month.
The minutes also revealed that “many” Fed officials had expressed support in raising interest rates sooner than later, adding to the growing consensus that a rate increase could be announced at the March meeting.
“The minutes have a bit of a bipolar feeling to them,” said Juan Perez, a currency trader at Tempus Inc. “The Fed is saying the economy is at a level that’s consistent enough that rates can be hiked fairly soon, but it also says that it would only tighten to combat inflation, and that we’re not at a point where inflation is so high that rates need to be hiked.”
The dollar has been in an uptrend of late, having risen 0.3% thus far this week and 1.7% for the month of February.
However, the buck’s gain has shown signs of stalling ever since the index hit its highest level since 2002 in early January. Year-to-date, the index is down 1%.
Against its Japanese counterpart, the U.S. currency USDJPY, -0.01% was changing hands at ¥113.05, compared with ¥113.57 late Tuesday in New York, a move of 0.5%.
The euro EURUSD, -0.0663% was at $1.0572, compared with $1.0546 late Tuesday. The euro had earlier dropped to a session low of $1.0494. The British pound GBPUSD, +0.0161% traded at $1.2462 from $1.2497.
In addition to his policies, Trump has also driven trading in foreign exchange markets by commenting specifically on individual currencies, including potentially naming rivals as currency manipulators.
On Wednesday, U.S. Treasury Secretary Steven Mnuchin, in a Wednesday interview with The Wall Street Journal, said a strong U.S. dollar reflected confidence in the U.S. economy compared with the rest of the world, which he called a “good thing” in the long run.
Last month, Trump said the dollar had gotten “too strong,” especially when compared with the yuan. Those comments were echoed by Peter Navarro, the head of Trump’s recently formed National Trade Council, who subsequently said that the euro was “grossly undervalued.”
The WSJ Dollar Index BUXX, -0.01% a measure of the U.S. dollar against 16 major currencies, was down 0.3% at 91.02, trading nears its lows of the session. The ICE U.S. Dollar Index DXY, +0.00% which gauges the buck against six rivals, fell 0.2% to 101.23, having previously risen by about that much.
Uncertainty over fiscal policies is a major stumbling block, according to the minutes from the Fed’s most recent meeting. Currency investors, in particular, have been betting that Trump’s policies on taxes and spending would stoke inflation and strengthen the dollar, a thesis that has contributed to the buck’s advance this month.
The minutes also revealed that “many” Fed officials had expressed support in raising interest rates sooner than later, adding to the growing consensus that a rate increase could be announced at the March meeting.
The dollar has been in an uptrend of late, having risen 0.3% thus far this week and 1.7% for the month of February.
However, the buck’s gain has shown signs of stalling ever since the index hit its highest level since 2002 in early January. Year-to-date, the index is down 1%.
The euro EURUSD, -0.0663% was at $1.0572, compared with $1.0546 late Tuesday. The euro had earlier dropped to a session low of $1.0494. The British pound GBPUSD, +0.0161% traded at $1.2462 from $1.2497.
In addition to his policies, Trump has also driven trading in foreign exchange markets by commenting specifically on individual currencies, including potentially naming rivals as currency manipulators.
On Wednesday, U.S. Treasury Secretary Steven Mnuchin, in a Wednesday interview with The Wall Street Journal, said a strong U.S. dollar reflected confidence in the U.S. economy compared with the rest of the world, which he called a “good thing” in the long run.
Last month, Trump said the dollar had gotten “too strong,” especially when compared with the yuan. Those comments were echoed by Peter Navarro, the head of Trump’s recently formed National Trade Council, who subsequently said that the euro was “grossly undervalued.”
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