By Rae Wee
SINGAPORE (Reuters) – The dollar edged higher on Thursday after minutes from the U.S. Federal Reserve’s latest policy meeting firmed bets for a rate hike this month, while a broad risk-off mood in Asia lent some support to the Japanese yen.
Minutes of the Fed’s June meeting released on Wednesday showed that the vast majority of policymakers expect further tightening in U.S. monetary policy, even as they agreed to hold interest rates steady last month.
That sent the dollar slightly higher alongside Treasury yields while stocks slumped, as expectations grew that the Fed will resume its rate-hike campaign this month and that rates would stay higher for longer in order to tame inflation.
The euro was last 0.09% lower at $1.0843, while sterling dipped slightly to $1.02702.
The U.S. dollar index gained 0.02% to 103.36.
“The FOMC minutes seemed hawkish with some committee members favouring a rate hike, though none voted for one at the end,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“It heightened the impression that the June pause was an interim one.”
Markets are now pricing in an 89% chance that the Fed will raise rates by 25 basis points at its policy meeting later this month, according to the CME FedWatch tool.
The yen, however, jumped more than 0.5% against the dollar to 143.86, as concerns about the global growth outlook, resulting from the aggressive monetary tightening cycles by major central banks, weighed on risk appetite.
The Japanese currency is traditionally considered as a safe haven asset.
“(The yen) was stronger on risk-off mode as fears of additional tightening may weigh on growth, risk assets,” said Christopher Wong, a currency strategist at OCBC.
“This is largely in line with our caution that worries of global growth concerns and rates staying higher for longer remain intact and may well curb risk appetite.”
The Australian dollar slipped 0.02% to $0.6652, after having fallen more than 0.5% in the previous session following a private-sector survey showing China’s services activity expanded at the slowest pace in five months in June.
The New Zealand dollar gained 0.11% to $0.61855.
“The Aussie is very sensitive to every bit of news from China at the moment,” said Sean Callow, senior currency strategist at Westpac.
“Since we got that reopening-from-lockdown rebound in the services sector (in China) … it’s been a bit patchy, and I think markets are just not quite sure if the Chinese government serious about stimulating the economy.”
The Chinese yuan last bought 7.2581 per dollar in the offshore market, after having fallen about 0.4% the previous session. The central bank set another stronger-than-expected midpoint fixing for the fourth-straight day this week, which traders believe is an attempt to prevent the yuan from weakening too fast and too far.[CNY/]
