FX Roundup: Dollar strengthens further ahead of Fed minutes

The dollar continued its uptick against the yen on Wednesday for a third successive session, and strengthened against other major global currency crosses as the market awaited release of minutes from the latest Federal Reserve meeting.

At 1639 GMT, the dollar extended gains against the yen by another 0.11% changing hands at JPY123.59, with traders looking for signs in the minutes of a possible US interest rate hike in December. The pound was broadly flat against the dollar exchanging at $1.5200, while the euro fell another 0.08% versus the greenback to change hands at $1.0633.

Kit Juckes, head of forex at Societe Generale, said it would be surprising if the Fed did not focus on two clear messages at the moment. “Firstly, that barring a surprise, the US central bank will raise rates in December; and secondly that once that has started, the Fed will act slowly and cautiously. The marginally hawkish majority at the Fed has two goals - to get rates off zero, and to do so with a minimum of fuss.

“In response, the front end of the US rates market may continue to price in a December hike with even greater conviction. The longer end of the Treasury market may be largely immune to slightly firmer front-end pricing, and the resilience of global equities has been there for all to see this week but even so, this will all be mildly dollar positive.”

Joshua Mahony, market analyst at IG, said, “Federal Reserve Bank of Atlanta’s CEO Dennis Lockhart set the tone for the US session, affirming his view that the FOMC should begin the process of normalisation with conditions now relatively settled. However, with a month until that decision has to be made, US economic data and Fed speeches will be analysed deeper than ever.”

Commodity linked currency crosses saw falls across the board with the Australian dollar down 0.48% against its US counterpart at US$0.7077 partially reversing the previous session’s gain. The New Zealand dollar fell a further 0.56% against its US counterpart to change hands at US$0.6435. The greenback rose 0.20% against the Canadian dollar exchanging at CAD$1.3347.

In Latin America, the dollar also traded higher against the Colombian peso (up 0.20%), Chilean peso (up 0.49%) and Mexican peso (up 0.22%) but fell against the Brazilian real (down 0.68%).