By Dow Jones Business News,
August 20, 2014, 03:54:00 PM EDT
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 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 firstname.lastname@example.org
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