The dollar fell against the yen on Wednesday after minutes of the Federal Reserve meeting in January showed the central bank's concern that global economic developments could pose a risk to the US economic outlook. The dollar fell below 114 yen following release of the minutes, while the euro briefly turned positive against the greenback.
The minutes supported a growing view that the Fed would back away from a signal it sent in December about possibly raising rates four times this year due to the recent slowdown in global growth and steep stock market drops. "The minutes are a more dovish tint to the Fed's language and, on balance, likely suggest a lower likelihood of the Fed raising rates in March," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in New York.
"The Fed remains data dependent and so upcoming gauges of US inflation, wages and jobs gains will be very closely watched. As it stands now, the market may be pricing in an overly negative economic scenario that results in no further rate hikes this year." In late trading, the dollar fell 0.3 percent versus the yen to 113.79 yen, declining for a second straight day.
The yen had weakened earlier after a recovery in oil and the stock market dimmed the Japanese currency's appeal as a safe haven. The greenback had edged higher against the yen earlier in the session after a surprise rise of 0.1 percent in US producer prices for January. Economists polled by Reuters had forecast the PPI dropping 0.2 percent last month and falling 0.6 percent from a year ago. US housing starts, meanwhile, unexpectedly fell in January likely as bad weather disrupted building activity in some parts of the country.
The dollar tumbled below 111 yen last week, a 16-month low, after stocks and commodities plunged and expectations faded for another Fed rate increase. It rebounded as risk aversion subsided but remained vulnerable to swings in oil prices. The dollar rose against the Swiss franc, up 0.3 percent on the day at 0.9916. Oil prices rose as efforts to freeze production levels and ease a global glut turned to Iran, after a lackluster response to Tuesday's deal between Saudi Arabia and Russia. That rise in oil helped European stock markets, although risk sentiment was at best fragile amid concern global growth was slowing. The low-yielding euro was flat against the dollar at $1.1140.
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