New Zealand dollar up after Fed minutes

Federal Reserve Chair Janet Yellen did say that the US economy’s performance is better and that there is a live possibility that there will be a rate hike in December. “But the October session also saw central bankers begin grappling with longer-term issues that may be relevant to the pace of subsequent rate hikes, including whether the USA economy’s lower long-term potential means low interest rates will become a permanent norm”.

There was a slight drop in the dollar index of approximately 0.2 percent at 99.436.

Minutes of the Fed’s October meeting showed that the conditions may “well be met” by the next gathering in December. According to the minutes, the USA was able to survive the seesawing global markets without any stress.

Minutes released Wednesday from the Fed’s October meeting show that members of the policy-setting Federal Open Market Committee made a conscious decision to start preparing markets for a December liftoff.

Upon the release of the minutes of the Fed’s October meeting, Wall Street rallied with the NASDAQ, S&P 500 and Dow Jones indexes closing higher than one percent.

Asian shares climbed on Thursday and the dollar backed off highs on the expectation the US Federal Reserve would be confident enough of the USA economy to raise rates in December but would then proceed with great caution on further tightening.

“The dollar strength continued since earlier this month following the upbeat jobs data, but investors have found a lack of fresh trading cues to prompt them to buy further”, said Minori Uchida, head of Tokyo global markets research at Bank of Tokyo-Mitsubishi UFJ.

The calculation is based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase.

Others Fed officials, however, counseled against delay.

Meanwhile, the New Zealand and Australian dollars were the biggest gainers against the US currency, both rising more than 1 percent.

“It seems the argument has moved on from when the Fed will raise rates to how many hikes we will see in 2016”, Chris Weston, chief market strategist at IG Ltd in Melbourne, said in a note to clients. Even some “dovish”, or pro-growth Fed policymakers recently said the time for moving away from near zero rates is approaching.

The United States of America dollar was off its highs, giving commodities a little help from Thursday’s fresh lows.

Policy rate rises would be dictated by the evolution of the economy and the balance of risks, he said.

The measure would require the Fed to use a formula to set interest rates but would allow the central bank to deviate from that strategy if economic conditions warranted a change.