The dollar touched a two-month low against the yen on Thursday, having tumbled after the minutes of the Federal Reserve's latest meeting showed some policymakers were concerned about persistently low inflation in a blow to rate hawks. The dollar eased to as low as 111.07 yen e, its weakest level since September 18. The dollar later came off that low and last fetched 111.29 yen, up 0.1 percent on the day.
Trading conditions were thinner than usual on Thursday, with Japanese financial markets shut for a public holiday. US markets will be closed for the Thanksgiving holiday. The greenback nursed its losses after sliding nearly 1.1 percent against the yen on Wednesday, its biggest one-day drop since mid-May. The minutes of the Fed's October31-November1 policy meeting released on Wednesday showed that Fed policymakers expect that interest rates will have to be raised in the "near term", reinforcing market expectations that the Fed will raise interest rates in December.
The minutes, however, also highlighted concern among some of the members over the inflation outlook, with the emphasis placed on economic data in determining the timing of future rate rises. "I think it's pretty conclusive now, that as we move into 2018, the Fed is going to be focusing on (low) inflation rather than growth, so this is still the overriding concern," said Stephen Innes, head of trading in Asia Pacific for Oanda in Singapore.
Against a basket of six major currencies, the dollar touched a one-month low of 93.160 earlier on Thursday. The dollar index later pared its losses and last stood at 93.216. A Fed rate hike in December seems like a "done deal", said Hirofumi Suzuki, an economist for Sumitomo Mitsui Banking Corporation in Singapore.
The focus will be on Fed policymakers' views on the possible pace of rate hikes in 2018, especially after Jerome Powell takes over as Fed chair from Janet Yellen, Suzuki said. Powell must be confirmed by the Senate before assuming his new post. Given the debate within the Fed about low inflation, there are doubts as to just how much the US central bank will be able to raise interest rates, Suzuki added.
The euro edged up 0.1 percent to $1.1830, nearing a one-month high of $1.1862 set last week. With the Fed minutes having dealt a setback to the dollar, most emerging Asian currencies edged higher, including the Chinese yuan. Against that backdrop, the Singapore dollar briefly touched a two-month high of S$1.3462 per US dollar, after data showed Singapore's economy grew at its quickest pace in nearly four years in the third quarter, echoing robust expansion readings across much of Asia.
"I think the market is pricing in MAS returning to a tightening stance," said Lee Jin Yang, macro research analyst for Aberdeen Standard Investments, referring to the chances that the Monetary Authority of Singapore (MAS), the city-state's central bank, could tighten its exchange-rate based policy next year.