Dollar weaken further on ambivalent Fed stance

The July meeting minutes released on Wednesday showed that Fed policymakers were generally upbeat about the USA economic outlook and labour market.

The dollar index, which measures the greenback against a basket of six major currencies, was last down 0.58 percent at 94.170 after touching a almost eight-week low of 94.141.

In the United States, stocks closed mostly higher on Wednesday as investors assessed the latest minutes from the Fed for more clues on the trajectory of interest rates.

The Treasury said it plans to sell $26 billion worth of two-year notes next Tuesday, $34 billion worth of five-year notes next Wednesday and $28 billion worth of seven-year notes next Thursday.

The Federal Reserve may raise interest rates as soon as next month, according to New York Fed President William Dudley, who warned investors that they are assigning a low probability to an increase in borrowing costs in the near future.

Rate setters at the Federal Reserve are divided over when the next interest rate rise should be, according to minutes from the U.S. central bank’s policy meeting.

The news comes after William Dudley, the influential head of the Federal Reserve’s NY branch, unexpectedly hinted this week that a rate hike was possible as early as September.

The FOMC noted that the rate hike would depend on incoming data that will shape the overall economic outlook, but also highlighted improvements in the domestic economy such as strong job gains in June after weak growth in May. “That said, I still think the market might be underpricing the chance of a rate increase this year”. If the Fed were to make a move in its upcoming September meeting, that would be its first hike to short-term interest rates this year.

S&P 500 e-minis were down 0.5 points, or 0.02 percent, with 96,711 contracts traded.

Yields on two-year notes, the coupon securities most sensitive to Fed policy expectations, fell two basis points to 0.73 percent. Bond prices fall when yields rise.

Currency markets are more concerned that the USA economic growth is weakening after recent economic data releases painted a weak outlook.

The euro edged up 0.2 per cent to $1.131with the common currency on track to rise more than 1 per cent this week.

Global benchmark Brent crude LCOc1 pulled back 0.1 percent to $50.84, after climbing as much as 2.4 percent to an eight-week high of $51.05 on Thursday.

A hike in U.S. borrowing costs would tend to lift the dollar by stirring demand for dollar-denominated assets, so Wednesday’s minutes weighed on the unit.