Currencies: Dollar Pares Losses As Fed Minutes Show Internal Split On Rate-hike Plan

The U.S. dollar regained ground versus major rivals Wednesday, after the Federal Reserve’s January meeting minutes showed that there was no consensus on how to proceed with regards to interest-rate policy.

The division among the central bankers with regards to future rates policy surprised a skeptical currency market on the upside as some had expected further dovish tones rather than the possibility of further rate increases in 2019. However, the Fed members did offer consensus around plans to reduce its $4 trillion-dollar balance sheet.

Last year’s four rate hikes gave the dollar a steady tailwind, while the recent dovish turn of the Fed weighed heavily. According to the minutes, officials also said that pausing rate hikes for the moment was posing “few risks at this point.”

The ICE U.S. Dollar Index DXY, -0.05%  was little changed at 96.510, having retraced a round 0.2% drop from earlier in the session.

Read: What’s next for the dollar in this ‘patient’ Powell world?

On the trade front, President Donald Trump has expressed some flexibility on the March 1 deadline he set to get a trade deal, but the U.S. is pressing for a stable Chinese yuan to be part of any agreement, according to a Bloomberg report.

Don’t miss: What a U.S. demand for China to stabilize its currency really means

The yuan was stronger against the dollar, climbing to its best level in about three weeks, with one buck buying 6.7207 yuan USDCNY, -0.5593% in Beijing and 6.7156 yuan USDCNH, -0.4818%  in the offshore market, down 0.6% and 0.4% respectively.

The British pound GBPUSD, -0.0153%  climbed back into the green after starting the session weaker. U.K. Prime Minister Theresa May met with European Commission President Jean-Claude Juncker on Wednesday. In a joint statement, they described the meeting as constructive, and said they would review the progress made again in the coming days.

The British Parliament is set to vote on May’s amended deal on Feb. 27. Meanwhile, U.K. political parties are dealing with resignations of lawmakers opting to become independents.

Brexit Brief: U.K Prime Minister May fights fires at home and abroad

Sterling last fetched $1.3060, little changed from late Tuesday.

The euro EURUSD, +0.0705% also sensitive to Brexit risk, retraced earlier gains as the dollar regained some strength and was little changed at $1.1345.

Elsewhere, the Japanese yen USDJPY, +0.15%  was slightly weaker against the greenback, with one dollar buying ¥110.81, down 0.2%.

Bank of Japan Gov. Haruhiko Kuroda said earlier, during Asian market hours, that the central bank wasn’t targeting exchange rates, walking back a statement that a stronger yen could force the bank to boost its stimulus.

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