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Dollar Down as Fed Minutes Hint at Tapering Discussion

ForexMay 20, 2021 12:04AM ET
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© Reuters.

By Gina Lee – The dollar was down on Thursday morning in Asia as the U.S. Federal Reserve meeting minutes revealed that policymakers suggested a slowdown of bond purchase due to a sign of accelerating inflation.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.08% to 90.123 by 11:53 PM ET (3:53 AM GMT).

The USD/JPY pair was down 0.07% to 109.14 as April's trade data released earlier in the day exceeded expectations. Exports grew 38.0% year-on-year, imports increased 12.8% year-on-year and the trade balance stood at JPY225.3 billion.

The AUD/USD pair edged up 0.17% to 0.7740. Employment data for April released earlier in the day said that the employment change decreased by 30,600 in April while the unemployment rate fell to 5.5%. Across the Tasman Sea, the NZD/USD pair edged up 0.13% to 0.7176.

The USD/CNY pair inched up 0.07% to 6.4385, with the People's Bank of China releasing the loan prime rate earlier in the day.

The GBP/USD pair inched up 0.01% to 1.4114.

In the minutes for the Federal Open Market Committee (FOMC)'s latest meeting, released on Wednesday, several policymakers suggested that the central bank start scaling back asset purchases “at some point” if the U.S. continues its economic recovery.

Investors were caught by surprise as Fed Chairman Jerome Powell and other Fed officials had reiterated that the Fed would stick to its current dovish policy as any rising inflation would be temporary.

“The minutes contained wording that appears to seek to start the discussion on tapering at an earlier timing than expected... if the next jobs data due on Jun. 3 is strong, markets will start bracing for the Fed making a specific mention on tapering at its next meeting in June,” Takafumi Yamawaki, head of fixed income research at JPMorgan (NYSE:JPM), told Reuters.

Other investors agreed with Yamawaki.

“It is worth noting that the FOMC minutes predate the latest CPI and payroll/earnings numbers, so the fears of the minority on the FOMC are likely to have become a little more acute since the April meeting,” Tapas Strickland, RBA’s director of economics and markets, told Reuters.

On the cryptocurrency front, bitcoin slid 3% to $35,654 as China banned financial institutions and payment companies from providing services related to cryptocurrency transactions. Meanwhile, ether plunged over 10% to as low as $2,168.

Dollar Down as Fed Minutes Hint at Tapering Discussion

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