Fed Minutes Confirm Dovish Stance Continues

  • April 12, 2021 9:38 AM PDT
    Fed Minutes Confirm Dovish Stance Continues

    The dollar weakened
    in early European trading Thursday, trading near two-week lows after
    minutes of the Federal Reserve's March policy meeting pointed -
    unsurprisingly - to continued loose monetary policy.To get more news
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      At
    2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback
    against a basket of six other currencies, was down 0.1% at 92.340, after
    dipping as low as 92.155 on Wednesday for the first time since March
    23.

      USD/JPY fell 0.1% at 109.70, GBP/USD was up 0.3% at 1.3769,
    EUR/USD was up 0.1% at 1.1881 after rebounding from the almost
    five-month low of 1.1704 at the end of March, while the risk-sensitive
    AUD/USD was up 0.3% at 0.7635.

      The minutes for the U.S. central
    bank‘s last meeting showed that the officials remained cautious about
    the country’s economic recovery from the ravages of the coronavirus
    pandemic, even while acknowledging that the recovery was gathering
    steam, and committed to monetary policy support until a rebound was more
    secure.

      Fed Chair Jerome Powell will speak at a virtual International Monetary Fund conference later on Thursday.

      Also
    weighing on the greenback has been the recent slide in bond yields.
    Although the benchmark 10-year Treasury yield last traded around 1.66%,
    after dipping below 1.63% during the previous session, this is still a
    far cry from the more than one-year high of above 1.77% late last month.

      “The
    greenback has been showing signs of weakness this week, especially
    versus the low-yielders, but it seems too early to conclude this is the
    start of a broader USD downtrend just yet,” said analysts at ING, in a
    note.

      The dollar's strong rally of the previous quarter was
    based on the idea that accelerating U.S. economic growth and inflation
    could force the Fed to abandon its pledge to keep interest rates near
    zero until 2024.

      While the Fed maintained its dovish stance, it
    did acknowledge that growth was expanding, and a quick look at the
    situation over in Europe with virus infections on the rise suggests that
    this competitive advantage is here to stay, at least for the next few
    months.

      “A continuation of the euro‘s good momentum is likely to
    need to rely on a tangible improvement in the EU’s virus/vaccine
    situation, which may still take some time to materialize, ” added ING.

      Elsewhere,
    USD/PLN fell 0.2% to 3.8433, while EUR/PLN dropped 0.1% to 4.5640 after
    the Polands central bank kept its benchmark interest rate at 0.1% for
    an 11th straight month on Wednesday.

      “The post-meeting statement
    confirms that the Council expects elevated CPI inflation to be only
    temporary and reiterated the need to continue bond purchases and the
    bill discount credit program,” ING analysts said, in a note.