Dollar holds gains after Fed minutes, sterling rises

October 11, 2016 8:47 PM EDT

Euro, Hong Kong dollar, U.S. dollar, Japanese yen, British pound and Chinese 100-yuan banknotes are seen in a picture illustration shot January 21, 2016. REUTERS/Jason Lee/Illustration/File Photo


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By Sam Forgione

NEW YORK (Reuters) - The U.S. dollar held near a seven-month high against a basket of major rivals on Wednesday after Federal Reserve meeting minutes reinforced expectations that the central bank would hike rates in December, while sterling rose on reduced concerns over Britain's economy.

Several voting members of the Federal Reserve policy committee judged a rate hike would be warranted "relatively soon" if the U.S. economy continued to strengthen, according to the minutes of the Fed's September meeting. Among voting and nonvoting policymakers, several said it was a "close call" whether to hike last month.

U.S. short-term interest rate futures were little changed following the minutes. Federal funds futures implied traders saw about a 9 percent chance the Fed would raise rates at its policy meeting next month and a roughly 70 percent chance of a rate hike at its December meeting, according to CME Group's FedWatch program.

The dollar index <.DXY>, which measures the greenback against a basket of six major currencies, initially slipped after the minutes but retraced gains to stand little changed. The index was last up 0.21 percent at 97.900, near a seven-month high of 98.043 <.DXY> touched ahead of the minutes.

"The minutes made it clear that they are much closer to raising interest rates," said Kathy Lien, managing director at BK Asset Management in New York. "We’re still looking at the dollar remaining strong."

The dollar was last up 0.71 percent against the yen at 104.23 yen after earlier touching a more than 10-week high of 104.48 yen. The euro was down 0.35 percent against the dollar at $1.1014 after touching an 11-week low of $1.1005 earlier.

The dollar was up 0.16 percent against the Swiss franc at 0.9897 franc, near an 11-week high of 0.9909 franc touched earlier.

Sterling was last up 0.67 percent at $1.2204 after rising as much as 1.6 percent to a session high of $1.2326 earlier.

British Prime Minister Theresa May's offer to give lawmakers some scrutiny of the process to leave the European Union calmed market fears of a "hard Brexit." Analysts said May's discussions with lawmakers could lead to a compromise that would make the country's divorce from the EU less damaging to the UK economy.

May's offer "doesn’t take a hard Brexit off the table, but it does mean other voices will be heard, and therefore perhaps a more gentle approach," said Richard Franulovich, senior currency strategist at Westpac Banking Corporation in New York.

(Reporting by Sam Forgione; Additional reporting by Anirban Nag in London; Editing by Chizu Nomiyama)



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