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US dollar wings higher after Fed minutes

February 20, 2014



The U.S. dollar soared higher against most of its counterparts Wednesday after the Federal Reserve minutes showed policymakers are keen to continue with stimulus tapering. The minutes showed that officials were in disagreement about when to hike the central bank's key policy rates, how to guide market expectations, and when the economic outlook may improve. In the end, the central bank voted unanimously to continue winding down its bond-buying stimulus program, and postponed larger policy statements to the next meeting in March. The U.S. currency strengthened versus most of its 16 major peers as Treasury yields rose after "several" central bank officials said "there should be a clear presumption in favor of continuing" the pace of bond-buying reductions, barring a change in the economic outlook. The pace of U.S. home construction declined more than forecast in January, data showed earlier today, indicating an unusually harsh winter probably played a role in slowing projects. This year's weather is causing the pace of U.S. economic growth to fall. February payrolls may the next piece of data that should be affected severe weather that has gripped the country during the last three months, following disappointing data on retail sales and manufacturing in January.  The Dollar index , which tracks the performance of the U.S. dollar against a basket of other major currencies climbed to 80.16 from 80.01 late Tuesday. As of 03:35 p.m. ET The euro fell versus the dollar 0.15% to $1.37353. Pound The British pound was last up 0.02% against the dollar at $1.66832. Data showed U.K. unemployment rose to 7.2% in the three months to December from 7.1% in the three months to November. Economists had expected the jobless number to drop to the 7% threshold that the Bank of England said in August would trigger talks about raising interest rates. Minutes from the BOE also showed all committee members voted to keep rates low and make no changes to the bond-buying program. Interest-rate hikes tend to be supportive for that country's currency. On Tuesday, data showed the U.K. inflation rate fell to 1.9% in January, slowing from December's 2%. The BOE raised its growth forecast of the U.K. economy last week. Governor Carney said decisions on a rate increase would be linked to a broader range of factors instead of unemployment level only, and bank rates may need to stay at low levels for some time until "spare capacity in the economy has been absorbed further."


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Source: ICN.com Financial Markets


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