Dollar weaker after Fed minutes show debate on 3rd hike
The dollar headed weaker in to Asia on Thursday as Fed minutes showed an increased debate about another rate hike this year.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last quoted down 0.36% to 93.41.
Japan reports trade balance figures for July with a surplus of ¥392 billion expected along with a 17.0% jump in imports and a 13.6% gain in exports. Later, Australia is expected to show the employment change for July added 20,000 jobs for an unemployment rate of 5.6%
Overnight, the dollar traded near three-week highs against a basket of global currencies on Wednesday, after recent economic data pointing to a strengthening U.S. economy lifted expectations of a third rate hike later this year.
However, a fissure appears to be developing at the Federal Reserve over when to raise interest rates as one group cites a low-inflation environment while another worries over the price of delaying.
The divide appeared in minutes released from the Federal Open Market Committee's July meeting, when central bank policymakers voted to hold the target rate to a range of 1 percent to 1.25 percent. The summary portrays views that inflation ultimately will get to the Fed's 2 percent target but is clearly not there yet.
Earlier, Cleveland Fed President Loretta Mester said that while some price readings have fallen this year, expectations are more stable, adding that monetary policy must anticipate changes in the data and not react to temporary aberrations. She said there is roughly an equal chance that the Fed is forced to raise rates more or less aggressively than currently planned in the months and years ahead.
The dollar continued its positive start to week, as solid retail sales data on Tuesday overshadowed a slump in U.S. housing data amid growing expectations the Fed will increase interest rates for a third time later this year.
Housing starts dropped 4.8% to a seasonally adjusted annual rate of 1.16 million units, the Commerce Department said on Wednesday.
The unexpected dip in housing starts, however, didn’t deter investor expectations of a rate hike later this year. According to investing.com’s fed rate monitor tool, nearly 50% of traders expect the Fed to hike rates in December, compared to just 37% last week.