Ahead of the Fed meeting minutes, the dollar declines in early trade

11 Oct 2023 , 09:22 AM

The Federal Reserve’s dovish remarks on Wednesday impacted on U.S. Treasury rates, which also declined. Traders looked to the Federal Reserve’s policy meeting minutes, which were released later in the day, for information on the central bank’s interest rate forecast.

Numerous Fed officials have hinted recently that the need for the American central bank to tighten monetary policy may not be as great as first believed.

President of the Atlanta Federal Reserve Bank Raphael Bostic and President of the Minneapolis Federal Reserve Neel Kashkari both stated on Tuesday that the central bank did not need to increase borrowing costs anymore.

The remarks caused the dollar index to linger close to that level in early Asian trade, pushing the currency to a two-week low versus a basket of currencies in the previous session. At the time, it was 105.66.

The euro recently traded at $1.0606, not far from Tuesday’s more than two-week high of $1.0620, while sterling rose to a three-week high of $1.2296.

Following the dovish Fed remarks, U.S. Treasury yields have also fallen. The two-year yield, which normally indicates short-term rate expectations, touched a one-month low of 4.9260% on Tuesday. Last seen at 4.9675%.

The 10-year benchmark yield was 4.6468%.

The September policy meeting minutes from the Fed will be released later on Wednesday, and they could provide additional information on its outlook for interest rates. The following day, statistics on US inflation is expected.

The news that China is considering further stimulus measures helped the Australian dollar rise to a one-week high of $0.6440 while the further Zealand dollar reached a two-month high of $0.6050.

Bloomberg News reported on Tuesday that China is seeking to boost its budget deficit for 2023 as the government gets ready to introduce fresh stimulus measures to support the economy’s achievement of Beijing’s annual growth objective.

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