Dollar little-changed after Dovish Fed meeting minutes
The US dollar gave up early gains to finish little-changed Wednesday after minutes from the Federal Reserve's January meeting portrayed a central bank more dovish on interest rates than thought.
The record of the January 27-28 policy meeting showed the Fed policymakers inclined to wait longer to begin hiking interest rates.
That jarred market views that a hike in the Fed funds rate would come in June or July.
The dollar had been trading at $1.1335 to the euro but quickly dropped to $1.1408 just after the minutes were released. It later pulled back to $1.1398.
The dollar also fell from 119.27 yen to 118.57 yen, before edging back to 118.76.
The members of the Federal Open Market Committee saw weakness and downside risks in falling inflation and weak economic growth in Europe and Asia, and at the same time saw that the US labor market still harbored significant slack.
"Many" FOMC participants indicated the environment "had inclined them toward keeping the federal funds rate at its effective lower bound for a longer time," the minutes said.
Moreover, "many participants observed that a premature increase in rates might damp the apparent solid recovery in real activity and labor market conditions."
The minutes gave no hint on when a rate increase could come and analysts presumed that it was still in the cards for this year.
Economist Harm Bandholz of UniCredit said that, given the strong jobs market news that came after the January meeting, the mid-year target should not be totally discarded.
Some parts in the minutes "suggested that several of the FOMC members have gotten cold feet as the envisaged date to remove the policy accommodation has come closer," he said.
However, he added: "It is important to reiterate that the Fed is indeed getting closer to raise its target rate. The minutes, despite their more dovish undertone, are consistent with that notion."
