LONDON/SINGAPORE—The dollar was roughly flat in choppy trading on Thursday after the release of the latest Federal Reserve minutes.
Details of the discussion from the central bank’s December policy meeting, released on Wednesday, showed policymakers remain focused on curbing inflation and do not envisage interest rate cuts in 2023.
Analysts said the minutes were broadly in line with expectations, explaining the relatively muted reaction in markets.
The euro was last up 0.05 percent against the dollar at $1.061. It rose 0.54 percent on Wednesday after French inflation came in lower than expected, boosting optimism about the eurozone economy.
Fed officials projected in December that the main interest rate, currently in the 4.25 percent–4.50 percent range, would rise to just over 5 percent in 2023 and likely remain there for some time.
The latest minutes reiterated the hawkish message on Wednesday, saying that “no participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023.”
The dollar index, which measures the currency against major peers, was last up 0.06 percent at 104.27 on Thursday.
It has fallen sharply from September’s 20-year high of 114.78 as investors have bet that a slowdown in growth and inflation will push the Fed to cut interest rates next year.
“There is definitely a real difference here between what the Fed believes and what the money market believes,” said Jane Foley, head of FX strategy at Rabobank.
Foley said brighter prospects for the eurozone and China were likely weighing on the dollar, and that economic data would determine whether the Fed sticks to its rate hike plans. The latest U.S. monthly employment figures, for December, are due on Friday.
Japan’s yen was up 0.07 percent at 132.55 per dollar, after falling 1.23 percent on Wednesday.
The yen has rebounded dramatically from a more than 30-year low of 151.94 reached in October. After a tweak last month, traders are betting the Bank of Japan (BOJ) will soon fully abandon its yield curve control (YCC) policy.
Sterling was down 0.3 percent to $1.202, after rallying 0.76 percent on Wednesday.
The onshore yuan rose more than 0.3 percent to 6.872 per dollar as the currency continued to be underpinned by China’s reopening measures, despite a surge in COVID-19 cases.
The Aussie dollar was last down 0.11 percent to $0.683, while the Kiwi was 0.06 percent higher at $0.629.
