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London - The dollar fell for a second day against the euro after the minutes of the Federal Reserve’s most recent policy meeting diminished investor expectations of a boost to US interest rates this year.
A gauge of the greenback headed for its biggest weekly drop since June after the minutes of last month’s gathering showed the Federal Open Market Committee discussed how the strong US currency is damping inflation and exports.
A rally in commodity prices set Australia’s dollar on course for its best week in almost four years. The euro was also buoyed by a report showing a recovery in manufacturing production in France, the region’s second-largest economy.
“The minutes of the FOMC were taken as relatively dovish,” so there’s “general US dollar weakness,” said Ulrich Leuchtmann, head of foreign-exchange strategy in Frankfurt at Commerzbank AG, which topped Euromoney Institutional Investor’s currency-research rankings for 2015. “Together with this really good data out of France, it’s something that creates impetus for euro-dollar.”
The dollar weakened 0.6% to $1.1338 per euro as of 12:10, headed for a 1.1% weekly drop that would be its biggest since September 11. The US currency gained 0.2% to ¥120.17.
The Bloomberg Dollar Spot Index, which measures the greenback’s performance against a basket of 10 major counterparts, fell 0.3% on Friday, leaving it 1.4% lower on the week.
‘Choppy’ dollar
The US central bank held rates near zero last month after slowing Chinese growth roiled global markets, though Fed Chair Janet Yellen has said officials expect to tighten policy this year.
The minutes, published Thursday, noted that the dollar has “strongly appreciated” against emerging-market counterparts and climbed versus currencies of commodity exporters as well as the US’s main trading partners.
“We expect the US dollar to trade in a choppy range next week because US interest-rate expectations are unlikely to adjust higher for now,” said Elias Haddad, a Sydney-based currency strategist at Commonwealth Bank of Australia.
The Bloomberg Commodity Index has gained more than 4% this month as traders pare bets for higher US rates. The odds of a Fed liftoff by December dropped to 39%, from 41% on September 30.
The calculations are based on the assumption the effective fed funds rate will average 0.375% after liftoff, versus the current target range of zero to 0.25%.
Aussie’s gain
Australia’s dollar jumped 0.9% on Friday to 73.22 US cents, pushing its advance this week to 4%, the best performance since December 2011.
“Solid stocks and commodities markets are generally spurring risk appetite, underpinning commodities currencies,” said Jun Kato, senior fund manager in Tokyo at Shinkin Asset Management.
“Receding expectations for a Fed rate hike are making the dollar vulnerable. Both the yen and the dollar are pressured.”
