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Dollar Up, Fed Meeting Minutes Reaffirm Commitment to Asset Tapering

ForexJul 08, 2021 01:03AM ET
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By Doris Yu – The dollar was up on Thursday morning in Asia after minutes from the U.S. Federal Reserve’s June meeting, released on Wednesday, said the central bank is moving towards tapering its asset purchases as soon as 2021.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.11% to 92.748 by 12:48 AM ET (4:48 AM GMT).

The USD/JPY pair inched down 0.1% to 110.54 as the Japanese government plans to declare another COVID-19 state of emergency in Tokyo until Aug. 22 to combat a recent surge of COVID-19 cases. It will cover the duration of the Tokyo Olympics.

The AUD/USD pair was down 0.21% to 0.7466. Reserve Bank Australia Governor Philip Lowe said earlier in the day that the central bank has not ruled out an interest rate rise before 2024.

"The condition for an increase in the cash rate depends upon the data, not the date; it is based on inflation outcomes, not the calendar… the central scenario remains that the condition for a lift in the cash rate will not be met until 2024," he said.

The NZD/USD pair fell 0.39% to 0.6992.

The USD/CNY pair inched up 0.1% to 6.4785 ahead of China's consumer price index and producer price index, due on Friday. The Chinese State Council also hinted that the People's Bank of China could cut its reserve requirement ratio for banks.

The GBP/USD pair edged down 0.11% to 1.3785.

“The committee’s standard of ‘substantial further progress’ was generally seen as not having yet been met, though participants expected progress to continue… various participants mentioned that they expected the conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had anticipated at previous meetings,” according to the minutes.

“The Federal Open Market Committee (FOMC) remains one of the more hawkish central banks under our coverage,” Commonwealth Bank of Australia (OTC:CMWAY) strategist Carol Kong wrote in a client note. Kong added the Fed will begin tapering talks at the policy meeting at the end of July. “We, therefore, expect the dollar to trade with an upward bias.”

Meanwhile, the dollar traded at $1.1792 per euro, just below a three-month high of $1.17815 touched overnight, as German lower-than-expected data raised doubts about Europe’s economic recovery from COVID-19.

Data released on Wednesday said that German industrial production decreased 0.3% month-on-month in May, compared to a 0.5% growth in forecasts prepared by

Elsewhere, the European Central Bank (ECB) is due to hand down a  monetary policy statement later in the day. Investors expect that the central bank will shift the inflation target to 2% from “below but close to 2%” currently, and ECB President Christine Lagarde is due to speak a day later.

Dollar Up, Fed Meeting Minutes Reaffirm Commitment to Asset Tapering

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