U.S. dollar holds near one-week high as Fed minutes show potential interest rate hike

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23rd May 2024 – (New York) The dollar maintained its position near a one-week high on Thursday, following its strongest performance this month against major currencies. This surge came after the release of minutes from the Federal Reserve’s latest meeting, which revealed that some officials were open to raising interest rates.

Sterling remained strong after reaching a one-month peak, driven by higher-than-expected inflation figures. Additionally, news of a U.K. parliamentary election scheduled for 4th July provided further support to the pound.

Despite the ongoing threat of intervention by Japanese officials, the yen remained weak, hovering just above a three-week low.

Ether, the world’s second-largest cryptocurrency, continued to hover near its two-month high reached on Tuesday. Speculation surrounding the potential approval of U.S. spot exchange-traded funds that would track ether contributed to its stability.

The dollar index, which measures the currency against six major rivals including the euro, pound, and yen, showed little change at 104.89 after recording a 0.28% increase overnight.

The minutes from the Federal Reserve’s 30th April – 1st May meeting indicated that officials still had confidence that inflationary pressures would ease gradually. However, the summary also revealed discussions about the possibility of tightening monetary policy.

James Kniveton, senior corporate FX dealer at Convera, noted that the minutes showed concerns about a slower-than-expected decline in inflation and a willingness among some members to implement further rate hikes if necessary. These factors supported the dollar. Kniveton also highlighted the potential for significant market volatility in early November, as the Federal Reserve meeting coincides with the U.S. elections.

The dollar saw minimal change against the yen, remaining at 156.77 yen after reaching 156.85 overnight, its highest level since 1st May. Market participants and analysts suspect that Japan’s Ministry of Finance intervened multiple times to support the yen following its sharp decline to a 34-year low of 160.245 per dollar on 29th April.

While the euro ticked 0.06% higher to $1.08275, it stayed close to the overnight low of $1.08175.

Sterling held steady at $1.2723 after surging to $1.27610 on Wednesday, its highest level since 21st March. This increase came as higher inflation dampened expectations of a rate cut by the Bank of England in June.