Oct 19 - The U.S. dollar rose to a nine-month high on Thursday as global markets went into tailspin after minutes of the Federal Reserve's last showed policymakers expect to reduce pandemic stimulus before the year is out.
The Dollar Index, which measures the performance of the U.S. currency against six rivals, extended gains in early London trading to rise 0.3% to its highest levels since Nov. 5, 2020, at 93.434.
According to the minutes of its July meeting, Fed officials largely expect to reduce their monthly bond buying later in this year but consensus on other key issues appeared elusive, including the start date and pace of the bond-buying and whether inflation, joblessness or the coronavirus pose a bigger risk to economic recovery.
The minutes pushed Wall Street's main stock index down more than 1% and drove several currencies to multi-week lows against the safe-haven Greenback. European markets fell at open and U.S. stock futures were pointed to a weaker start.
The euro fell as high as $1.16655 for the first time since Nov. 4, while the greenback rose as low as 110.225 against the yen. In addition, Canada's loonie reached a four week low of $.2699.
A reduction in debt purchases is widely considered positive for the US dollar as it is expected to raise government bond yields, making it more attractive for investors to hold dollar-denominated assets.
Though the dollar touched a new milestone, regional Fed analyst Antje Praefcke noted that the minutes provided little insight compared to what Commerzbank analysts have recently said?
From that point of view, it comes as little surprise that the minutes did not give much news in the end and the dollar only reacted very shortly. Until then, it makes more sense to keep an eye on the current developments of pandemic and economic data.
The focus for Fed watchers is the annual Jackson Hole symposium in Wyoming, which runs between Aug. 26 to August 28.
The Norwegian krone increased its fall against the euro after the central bank put interest rates on hold and reiterated that it expects to hike them in September. The krone was against the euro almost 0.7% last, down between 10.49 and the Euro at 7.68.
Elsewhere, the Australian currency sank to $0.7198, a level not seen since Nov 5 and was last down 0.9%. The kiwi slumped to $0.68465, the weakest in November and was last down 0.7%.