Dollar Makes Dash Lower as Fed Open to Pause on Rate Hikes
The dollar resumed its slide against its rivals Wednesday as the Fed indicated it was willing to hold off on rate hikes amid concerns about global growth and subdued inflation, according to the minutes of its December meeting.
The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell 0.73% to 94.78.
Fed members indicated they could afford to be "patient" about future rate hikes, citing a list of concerns including volatility in financial markets, slowing global growth and muted inflation pressures.
While the Fed's somewhat dovish tone kept the dollar on the back foot, the damage was done by earlier comments from Fed officials.
Federal Reserve Bank of Atlanta President Raphael Bostic said at an event in Tennessee that following the rate hike in December, rates were closer to neutral, suggesting that the runway for further hikes is limited.
While Chicago Fed President Charles Evans said the Fed can afford to take a wait-and-see approach to future policy, but added that rates could move higher if "downside risks dissipate."
The dollar was also knocked by a stronger sterling despite British Prime Minister Theresa May suffering an early setback to her Brexit plans ahead of a key vote in parliament next week.
British lawmakers voted in favor of a measure forcing May to provide alternative Brexit plan sooner rather later, should the prime minister's plan get voted down.
The government was expecting to have 21 days to come up with an alternative plan for Brexit, if the current plan fails to get enough votes on Jan. 15. But it now would have to submit it within just three working days.
GBP/USD rose 0.61% to $1.2795, while EUR/USD surged 0.93% to $1.1546.
USD/CAD fell 0.43% to C$1.3215 as soaring oil prices supported the loonie, limiting gains in the pair. The pair also came under pressure after the Bank of Canada kept rates steady, but said it still intended to raise rates "over time"
USD/JPY fell 0.43% to Y108.46.