Dollar edges lower after Fed minutes disappoint bets on hawkish tone

August 16, 2016 8:51 PM EDT

U.S. dollar bank notes are seen in a bank in Budapest August 8, 2011.REUTERS/Bernadett Szabo


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By Sam Forgione

NEW YORK (Reuters) - The U.S. dollar erased early gains and edged lower against the euro, yen and Swiss franc on Wednesday after minutes from the Federal Reserve's July meeting showed general agreement that more data was needed before the next rate increase from the central bank.

The minutes showed that members of the U.S. central bank's rate-setting Federal Open Market Committee were generally upbeat about the U.S. economic outlook and labor market, but several said a slowdown in the future pace of hiring would argue against a near-term hike.

Analysts said the minutes disappointed traders who expected the Fed to take a more hawkish tone. Those expectations were bolstered Tuesday, when New York Fed President William Dudley and Atlanta Fed President Dennis Lockhart signaled a potential rate increase before the end of the year.

"Some investors got the feeling maybe, maybe wrongly, that the minutes were going to confirm the view of Dudley and Lockhart yesterday that September is possible for a rate hike," said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Ltd in New York.

"Maybe there is a little bit of disappointment because of that."

The dollar index, which measures the greenback against a basket of six major currencies, was last down 0.04 percent at 94.753 after gaining about 0.3 percent to 95.102 earlier Wednesday. The index briefly fell 0.3 percent to a session low of 94.510.

"These minutes don’t support an interest rate increase sooner rather than later, and therefore I think the dollar is going to continue to falter a bit," said Chris Gaffney, president of EverBank World Markets in St. Louis.

Federal funds futures for December delivery implied traders saw a 47 percent chance of a rate hike in December, down from 58 percent before the release of the minutes, according to CME Group's FedWatch program.

While the dollar slipped, it remained within the day's ranges. The euro was last up 0.08 percent against the greenback at $1.1285 after hitting a session high of $1.1315, which remained below Tuesday's more than seven-week high of $1.1322.

The dollar was last down 0.07 percent against the yen at 100.21 yen after hitting 100.06 yen shortly after the minutes. That session low remained above Tuesday's more than seven-week low of 99.53 yen.

Against the Swiss franc, the dollar was last roughly flat at 0.9615 franc after hitting a session low of 0.9599 franc after the minutes.

(Reporting by Sam Forgione; Editing by Chizu Nomiyama and Diane Craft)



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