Dollar Strengthens on FOMC Minutes

By Dow Jones Business News, 

By James Ramage

The dollar jumped against the euro and yen on Wednesday after minutes from the most recent meeting of the Federal Open Market Committee showed the central bank was gradually shifting its stance in a more hawkish direction.

The greenback rose 0.8% versus the yen to ¥103.71, its highest since April 4. The euro dropped 0.4% against the dollar to $1.3264, an 11-month low.

The minutes showed that FOMC members saw labor-market progress and increases in inflation accelerating in a manner that was bringing conditions closer to normal or those before the financial crisis. There were clear disagreements regarding how much slack remained in the labor market, a key gauge along with consumer prices, that the Federal Reserve uses to assess the state of the U.S. economy.

Amid growing debate among committee members, the Fed appears to be shifting away from a dovish view and toward a more balanced one, in the process sounding more hawkish than it did before, said Omer Esiner, chief market analyst at the currency brokerage Commonwealth Foreign Exchange Inc. The move brings the U.S. central bank closer to a point when it will consider raising interest rates, which would boost the dollar, he said.

"It's too early to suggest rates may rise sooner than expected," Mr. Esiner said. "But the consensus view of the Fed is shifting to the center, part of the process of the Fed normalizing its stance, which is fundamentally positive for the dollar."

The statement from the last FOMC meeting, which concluded July 30, showed little change in monetary policy at the central bank. The Fed moved closer to ending its bond-buying program but gave little indication about its plans or schedule for raising interest rates. Investors hoped the minutes would illuminate how the debate among Fed officials on rates is progressing.

Investors are looking ahead to the Jackson Hole gathering of global central bankers, where Federal Reserve Chairwoman Janet Yellen will speak Friday. The market seeks further indications that the central bank is shifting its thinking about the U.S. economy and its schedule for raising rates. Higher interest rates would benefit the dollar, as investors would receive greater returns from dollar-denominated assets.

The dollar index, which compares on a weighted basis the dollar against a basket of six of the most heavily traded currencies, gained 0.4% on the day, reaching its highest point since September. In addition to the euro and yen, the greenback gained against the British pound, reaching its strongest level in four months, at $1.6599, and versus the Swiss franc, at 0.9134 franc, the highest level since late January.

-- Write to James Ramage at

  (END) Dow Jones Newswires
  Copyright (c) 2014 Dow Jones & Company, Inc.

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