The minutes of the Fed’s March policy meeting showed signs of a split emerging within the FOMC, as two committee members argued for a rate hike. However, only one member voted for a rate increase in March, while the majority of participants preferred to take a “cautious approach” to raising rates.
Concerns about the prospects for global growth, disinflationary pressures from overseas and uncertainty about the Fed’s own forecasts for the US economy were cited as the main reasons for deciding to proceed cautiously.
The dovish minutes sent the dollar plummeting to 6-month lows against a basket of currencies, with the dollar index touching an intra-day low of 94.01 in Thursday’s Asian session. The greenback touched fresh 17-month lows versus the yen, dropping to 108.62 yen in late Asian trading.
Traders ignored warnings of a possible market intervention from a senior official in Japan’s finance ministry who described the yen’s appreciation as “one-sided”. On Wednesday, Japan’s prime minister had made comments to the contrary, dampening expectations of a yen devaluation.
The Japanese currency also rose sharply against the euro and the pound. The euro was down at 124.20 in late Asian trading, while the pound dropped to a new 2½ year low of 153.08 yen.
The euro soared to a 6-month high of 1.1453 against the dollar on Thursday despite comments from the ECB’s Peter Praet that the ECB would ease further if there were more “adverse shocks”. The single currency was also bullish against the pound as it rallied to the highest level since June 2014 to break above 0.81 pounds.
Sterling continued to be dogged by ‘Brexit’ concerns but managed to rebound from yesterday’s one-month low of 1.4004 dollars to firm to 1.4087 dollars today.
The Australian, New Zealand and Canadian dollars were lifted higher by stronger commodity prices. Crude oil prices rallied 5% on Wednesday following an unexpected drop in US crude stocks. WTI futures were last up 1% at $38.13 a barrel, while Brent crude was last trading at $40.12 a barrel.
This helped the Aussie to rebound above the 0.76 level and the kiwi to reclaim the 0.68 handle versus the US dollar. The Canadian dollar was also stronger as USD/CAD declined to 1.3055.
The remainder of the day will be relatively light in terms of data, with only the US initial jobless claims to keep investors busy. However, the publication of the ECB’s March monetary policy accounts as well as a speech by Mario Draghi at 1400 GMT will also be eyed.