Dollar rises after Fed minutes, hovers near six-week highs

A man counts US dollars in a money exchange shop in Dhaka on July 28, 2022.
Munir Uz Zaman | AFP | Getty Images

The dollar rose Wednesday, continuing to trade near six-week highs as investors parsed through minutes from the Federal Reserve's recent policy meeting

The minutes showed inflation remained "well above" the Fed's 2% target, and that the labor market remains "very tight, contributing to continuing upward pressures on wages and prices."

Fed officials also said that "inflation data received over the past three months showed a welcome reduction in the monthly pace of price increases but stressed that substantially more evidence of progress across a broader range of prices would be required to be confident that inflation was on a sustained downward path," according to the minutes.

Recent signs of of economic strength have caused traders to pencil in further interest rate hikes from the Federal Reserve on Tuesday, driving the U.S. S&P 500 stock index 2% lower and the dollar up 0.3%.

The euro was last down 0.4% to $1.0601, while the dollar index gained 0.36% to 104.55, not far off the six-week high of 104.67 hit at the end of last week.

A blockbuster U.S. employment report in early February sparked the rebound in the dollar, which has been helped along by a series of strong data releases.

Traders on Tuesday were projecting the Fed's main interest rate would rise to peak around 5.35% in July, according to Refinitiv data based on derivative market pricing.

At the start of February, expectations were for a peak just below 5%. The Fed has raised rates to a range of 4.5% to 4.75%, from 0% to 0.25% as recently as March 2022.

Investors have also increased their ECB rate bets. Deutsche Bank on Tuesday said it now expects rates to rise to 3.75%, having previously expected them to rise to 3.25% from their current level of 2.5%.

The dollar slipped 0.1% to 134.87 yen, after rising more than 0.5% on Tuesday.

The pound was down 0.6% to $1.2044. It climbed 0.6% on Tuesday after British survey data also came in strong.