The U.S dollar advanced on Wednesday, February 21, as traders near-term focus shifted to the minutes of the Federal Reserve’s last policy meeting for hints on the future pace of U.S. monetary tightening.
The dollar benefited from the higher yields, with its index against a basket of six major currencies edging up to a one-week high of 89.904.
The index has bounced 0.9 percent so far this week after slumping 1.5 percent the previous week to a three-year low.
The U.S. currency has been weighed down by a variety of factors this year, including concerns that Washington might pursue a weak dollar strategy and the perceived erosion of its yield advantage as other countries start to scale back their easy money strategies.
Confidence in the dollar has also been shaken by mounting worries over the U.S. budget deficit.
But the greenback managed to find bids once the dust began to settle after last week’s tumble.
“We are seeing the dollar being bought back after last week’s slide. The steady U.S. economy and the possibility of the Fed accelerating its rate increases will likely keep fuelling the dollar’s rebound, particularly against the euro and yen,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.
Later on Wednesday, investors will turn their attention to the minutes of Fed’s last policy meeting in late January. Analysts said a hawkish tone to the minutes could prompt markets to price in the risk of a faster U.S. interest rate hikes and help lift the dollar further.
The dollar extended an overnight surge and gained 0.45 percent to 107.800 yen. The euro fell 0.1 percent to $1.2323 following losses of 0.55 percent the previous day.
The Australian dollar lost 0.4 percent to $0.7852 and the New Zealand dollar dipped 0.2 percent to at $0.7333,Reuters reports.
The stronger dollar weighed on commodities, with Brent crude futures losing 0.8 percent to $64.73 per barrel and U.S. crude oil futures slipping 1 percent to $61.15.
