The dollar dropped to more than two week-lows against the euro and Swiss franc on Wednesday after minutes of the latest Federal Reserve monetary policy meeting suggested that the US central bank may not raise interest rates anytime soon. The minutes of the Federal Open Market Committee in March showed that the Fed would wait for a considerable time after ending a bond-buying program before finally raising rates.
Fed Chair Janet Yellen, at a press conference after the FOMC meeting defined "considerable time" as "around six months" depending on the economy. Analysts said the latest minutes showed that the Fed seemed to back away from that six-month gap. "The headlines convey that the Fed is not as hawkish as we thought," said Richard Franulovich, senior currency strategist, at Westpac in New York. In early afternoon trade, the euro rose as high as $1.3856 against the dollar, its strongest level since March 24, and was last at $1.3848, up 0.4 percent.
Against the Swiss franc, the dollar fell to 0.8795 franc, its lowest level in more than two weeks. The dollar was flat against the yen, falling following the Fed minutes, after trading higher for most of the session. Eric Viloria, currency strategist, at Wells Fargo Securities in New York added that the Fed minutes affirmed the US central bank's commitment to maintain an accommodative policy, with its balance sheet still expanding.
Earlier on Wednesday, the dollar recovered from its largest one-day fall versus the yen in more than seven months hit on Tuesday. The greenback's bounce was the first in four days. "Our view going into 2014 is still a broad-based dollar rally predicated on the acceleration of the US economy and rising US rates," said Mark McCormick, currency strategist, at Credit Agricole in New York. "A lot of that has been on the back burner given the murkiness of the US data due to the weather impact. But we expect that to change and in fact, we're already starting to see pockets of strength in some of the leading indicators and some of the survey-based measures." The Swedish crown, meanwhile, was one of the biggest movers on Wednesday, falling versus the euro, after the Riksbank signalled it was moving closer to cutting interest rates.
Dealers from Scandinavian banks said the central bank's lowering of its projected path for rates opened the way to a push towards 9.05 crowns per euro, although there would be some caution ahead of inflation numbers due on Thursday. The euro rose 0.2 percent against the Swedish crown to 8.9806. One striking trend on the majors since last week is the euro's resilience in the face of signals from the European Central Bank that it is prepared to consider outright money printing to support growth if need be.
A number of dealers said the euro zone common currency was being supported by China's need to re-order the balance of currencies it holds in its reserves after buying billions of dollars last month to weaken the yuan. Similarly, many pointed to signs of intervention by South Korean authorities overnight that may support the euro. The refloating of the euro zone's struggling southern states on bond markets, exemplified on Wednesday by Greece's announcement of its first bond sale in four years, has also drawn capital back into Europe this year.
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