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Dollar advances as Fed minutes open door to future taper talks

EconomyMay 19, 2021 03:46PM ET
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© Reuters. FILE PHOTO: Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking

By Stephen Culp

NEW YORK (Reuters) - The dollar gained ground on Wednesday, snapping a four-day losing streak and bouncing off a multi-month low following the release of the minutes from the Fed's most recent monetary policy meeting.

In those minutes, a number of members of the U.S. Federal Reserve's Federal Open Market Committee (FOMC) said that should the economic recovery continue to gain momentum, it would be appropriate "at some point" to discuss tightening its accommodative policy, giving the greenback a boost.

"The big thing from the Fed minutes is the mention of beginning of taper talks," said Chris Gaffney, president of world markets at TIAA Bank in St. Louis. "Any mention of the Fed stepping in and raising rates will have a major impact on the dollar."

Still, the minutes were from a meeting that occurred before the release of key economic data, which showed further weakness in the labor market and price spikes driven by a supply/demand imbalance.

Since then, the Fed has repeatedly offered assurances that surging prices in the near term will not translate to long-term inflation.

"The Fed is generally singing from the same song sheet, stating that inflation will be transitory," Gaffney added. "In general, they've done a good job of keeping a pretty unified front."

The dollar also benefited from a broad risk-off sentiment, which saw the major U.S stock indexes slide and cryptocurrencies plunge.

"When we saw the big move away from bitcoin, it was an indication that investors are moving away from risk assets, and that benefits the dollar," Gaffney said. "It's an indication of flight to safety."

Bitcoin briefly plunged to its lowest level since January in the wake of China's decision to ban financial and payment institutions from providing digital currency services, but pared its losses after some of its prominent backers reiterated their support.

Rival cryptocurrency ethereum was last down 22% at $2,623.

Gaffney believes digital currency investors should gird their loins for more of the same.

"Crypto markets were ripe for a sell-off with the run-up we’ve seen," he said. "I expect to see more of the wild roller-coaster ride that we’ve seen going forward."

U.S. Treasury yields hit session highs in the wake of the Fed minutes' release. [US/]

The dollar index, which measures the greenback against a basket of world currencies, was last up 0.52% at 90.254.

Meanwhile, pricing pressures were being felt elsewhere. UK inflation more than doubled in April to 1.5% from a month earlier, sparking similar concerns over longer-term inflation.

The British pound eased 0.58% against the dollar to $1.4106.

Canada also released its latest inflation data, which showed consumer prices jumping to an annual rate of 3.4%.

The greenback gained 0.64% against the Canadian dollar to $1.214, but was still hovering near its weakest level since May 2015.

The euro reversed course after touching its highest level against the dollar since the beginning of January, falling 0.5% to $1.2164.

Against the Japanese yen, the dollar rose 0.25% to 109.26.

Dollar advances as Fed minutes open door to future taper talks
 

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Comments (9)
Steve Lora
Steve Lora May 19, 2021 6:42PM ET
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What happened to bidens 1 million jobs in April? and that $15 minimum wage?
Francisco Javier Lazarini
Javisman May 19, 2021 10:06AM ET
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monster inflation!
Vlad Lozovskiy
Vlad Lozovskiy May 19, 2021 9:15AM ET
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I like how they talk about everything, but printing. LOL LOL LOL All of a sudden all these "smart people" can't see why dollars is going down! So complex!!!
Ricardo Diogo
rcd72 May 19, 2021 2:06AM ET
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you cannot tax cripto, so it social contribute is worthless. the cost and burden of schools, roads, infrastructure, health care will be paid by workers and companies... cripto is a waste of energy, good for money laundering, and support obscure or terror activity it is useless.if one wants to gamble we already have casinos.!
Investing Man
Investing Man May 19, 2021 2:06AM ET
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Lol... of course they tax crypto and the crypto leaders are participating with the irs to insure so lmao
Investing Man
Investing Man May 19, 2021 1:38AM ET
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Its actually reassuring chinas institutions cant participate in crypto
Mark Martunaj
Mark Martunaj May 19, 2021 1:37AM ET
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They're upset because cant print coins can't control it can't tax it they way them please so yeah they quit tight at the moment looking for an alternative, there brothers and sisters own the Wallstreet and that's no good for Wallstreet, so those big boys are trying to do something about it.
Ricardo Diogo
rcd72 May 19, 2021 1:37AM ET
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correct , not only them but that anyone can tax , so school s roads health care will be paid by workers and companies... cripto are worthless , are energy consumer, useless.if one wants to gamble we already have casinos.!
Javier Escamilla
Javier Escamilla May 19, 2021 1:20AM ET
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Might want to replace hold for held as of now 12:20 am central
Abdelraziq Abuaisha
Abdelraziq Abuaisha May 18, 2021 11:00PM ET
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Today yor dollar will become a toilet paper, put my name in bold and mark the words I said.
William Bailey
William Bailey May 18, 2021 11:00PM ET
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Well, as soon as the credit system implodes dollars will be king ! The money supply han not changed in decades . When the credit system implodes ( a sudden devauation in assets when credit can no longer be created at a pace to keep inflating assets, you get the idea . )
Abdelraziq Abuaisha
Abdelraziq Abuaisha May 18, 2021 11:00PM ET
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No one needs your Dollar it’s a paper, we can’t eat it, we can’t use it for building or clothing or any real thing. You get the idea? :)
Jacob Steinschlag
Jacob Steinschlag May 18, 2021 11:00PM ET
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the money supply hasn't changed? We have a 25% YoY increase
Francisco Javier Lazarini
Javisman May 18, 2021 11:00PM ET
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its heading to turn into mexican peso.
James Andrews
James Andrews May 18, 2021 9:17PM ET
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What did these fools think was going to happen printing like this?
Francisco Javier Lazarini
Javisman May 18, 2021 9:17PM ET
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politicians will be politicians.
 
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