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Fed Minutes Take Dollar Lower

cnbc.com
Wednesday, 3 Jan 2007 | 2:32 PM ET

The dollar slipped against the euro and yen after minutes of the Federal Reserve's policy meeting on Dec. 12 indicated the central bank sees the downside risks to economic growth have increased.

"(The Fed's) biggest concern is inflation, not the economy, and that's the same as it was in October, and that is not a surprise," said Hugh Johnson, Chief Investment Officer at Johnson Illington Advisors, "The statement implies that they will leave rates unchanged for the foreseeable future."

Rate Moves

The ECB is expected to raise borrowing costs to 3.75% in coming months from the current 3.5%.

Japanese rates are seen rising at a very gradual pace from 0.25%, maintaining the euro's yield advantage.

Official figures for December showed the number of unemployed people in Germany posted its sharpest monthly fall since 1950, pushing the jobless rate below 10% for the first time in over four years.

The euro hit its highest level against the Swiss franc in almost seven years, but fell 0.4% against the dollar to $1.3223, more than half a cent below three-week highs set in the previous session.

FOMC Minutes, U.S. Data

Minutes from the U.S. Federal Reserve's latest rate-setting meeting at 2 p.m. New York time were seen casting light on current thinking for the U.S. rate outlook, with analysts widely expecting that the next move in borrowing costs will be a cut.

Fed officials have been talking tough on inflation even as the market bet on rate cuts, and dollar bears will be looking for any hint of a softer tone.

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