Dollar Down, Near Two-Week Lows as Fed Meeting Minutes reiterate Dovish Stance

Dollar Down, Near Two-Week Lows as Fed Meeting Minutes reiterate Dovish Stance – The dollar was down on Thursday morning in Asia, alongside falling Treasury yields, as the U.S. Federal Reserve resolutely kept to a dovish stance in the minutes from its latest policy meeting.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.07% to 92.405 by 12 AM ET (4 AM GMT), near a more than two-week low.

The USD/JPY pair inched down 0.10% to 109.73.

The AUD/USD pair inched up 0.09% to 0.7621 and the NZD/USD pair inched up 0.10% to 0.7018.

The USD/CNY pair inched up 0.09% to 6.5472 and the GBP/USD pair edged up 0.17% to 1.3758.

The Fed’s minutes from its March meeting failed to offer any new catalysts to dictate the market direction and remained cautious about the road to recovery from COVID-19. The central bank reiterated its pledge to continue monetary policy support for the economy until the recovery was on a more solid footing, even as unprecedented stimulus measure saw the U.S. recovery gather pace.

However, some investors remained optimistic about the U.S. currency’s prospects.

“Hard to argue that the U.S. macro outperformance trade is exhausted; the strong vaccine drive, reopening and stimulus set to produce some exceptionally strong rebound data in the next several months,” Westpac analysts said in a note, which also forecasts a run at 94.5 for the dollar index (DXY).

“Admittedly though, the next DXY upleg may take a few weeks before it develops momentum – a lot of good news is priced in,” the note added.

U.S. Treasury yields were also on investors’ minds as the benchmark 10-year Treasury yield hovered near 1.67% on Thursday after dipping below 1.63% during the previous session.

Although the market’s direction is difficult to call, Citigroup (NYSE:C) Global Markets Japan’s chief currency strategist Osamu Takashima expects the next move for the greenback to be lower.

“Current market sentiment is mild risk-on, and under such circumstances, the dollar will weaken gradually – but no big moves,” with the retreat in U.S. yields also removing a driver for dollar gains,” Takashima added.

Across the Atlantic, the euro consolidated around the $1.1865 mark as it rebounded from an almost five-month low of $1.1704 touched on Mar. 31.

“The vaccination progress in the Eurozone is significantly lagging that of the U.S., and COVID-19 infection rates in the Eurozone are on the rise again… as such, EUR/USD is vulnerable to a move lower towards 1.1700 in the near‑term,” Commonwealth Bank of Australia (OTC:CMWAY) strategist Joseph Capurso said in a note.

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