MW: Dollar extends rise, but Fed minutes could dictate dayâ€™s tone
The U.S. dollar rose against its major rivals on Wednesday, extending its recent uptrend as investors continued to scale up their timelines for when the Federal Reserve could next raise interest rates.
Trading could be quiet ahead of the Fedâ€™s minutes from its most recent meeting, which will be released Wednesday afternoon. The minutes will be closely scoured for any clarity into the timing of U.S. central bankâ€™s next policy move.
The WSJ Dollar Index BUXX, +0.04% a measure of the U.S. dollar against 16 major currencies, was up 0.1% at 91.34 but had dipped as low as 91.12 earlier in the session. The ICE U.S. Dollar Index DXY, +0.19% , which gauges the buck against six rivals, rose 0.2% to 101.57.
The index has been stronger of late, having risen 0.6% thus far this week and 2% for the month of February.
On Tuesday, the index closed at its highest since January 12 after Philadelphia Federal Reserve Bank President Patrick Harker said he would likely support an interest-rate increase at the central bankâ€™s next meeting in March if the data supported such a move. He said he wouldnâ€™t take a March increase â€śoff the table.â€ť Previously, investors had considered a March increase unlikely.
â€śWe expect the minutes to reiterate the hawkish, neutral tones that [Fed Chairwoman Janet] Yellen hinted at last week, which should be fairly positive for the dollar overall,â€ť said Viraj Patel, a foreign-exchange strategist at ING. â€śRight now we see a 50-50 chance of a March rate hike, which is greater than the overall marketâ€™s expectations. Between that and other dollar-positive stories in the pipeline, we see more upside risk than downside risk at current levels.â€ť
Much of the dollarâ€™s recent strength has been tied to the election of Donald Trump. Investors expect his policies on taxes and spending will both accelerate economic growth and stoke inflation. Patel said that a tax reform plan could be â€śa game changer for the dollar, and one that hasnâ€™t been discounted by markets.â€ť
However, the buckâ€™s gain has shown signs of stalling, with the index down 0.6% year-to-date.
Against its Japanese counterpart, the U.S. currency USDJPY, -0.47% was changing hands at ÂĄ113.15, compared with ÂĄ113.57 late Tuesday in New York, a move of 0.4%.
The euro EURUSD, -0.3417% was at $1.0509, compared with $1.0546 late Tuesday. The British pound GBPUSD, -0.1684% traded at $1.2458 from $1.2497.