The dollar weakened across the board on Thursday after rising for four straight sessions, as investors cashed in recent gains driven by widespread expectations of a US Federal Reserve interest rate increase next month. The minutes of the latest Federal Reserve meeting released on Wednesday reinforced the rate hike view, providing broad, long-term support for the dollar.
However, some analysts opined that the minutes also showed a debate among the Fed members of the monetary policy committee about the US economic outlook, which may have affected sentiment about an impending rate hike in December. That could partly explain why the dollar weakened despite a generally upbeat view on the US economy, analysts said. Still, futures traders have placed a 72 percent chance of the Fed raising rates next month on Thursday, up from 68 percent following the release of the Fed minutes on Wednesday afternoon, according to the CME Group's FedWatch.
"What we're seeing is probably a squeeze in dollar longs," said Vassili Serebriakov, currency strategist, at BNP Paribas in New York. Last week's US dollar net long positions of $33.68 billion were the largest since mid-August. In late morning trading, the dollar fell 0.7 percent against the yen to 122.82. The yen strengthened after the Bank of Japan kept policy steady. The dollar index was down 0.7 percent at 98.951. On Wednesday, the index hit a seven-month peak.
Losses in the dollar index could be mainly attributed to the greenback's fall against the euro. The euro on Thursday rose 0.7 percent to $1.0739. Meanwhile, the New Zealand and Australian dollars were the biggest gainers against the US currency, both rising more than 1 percent.
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