Dollar sinks again after Fed remains cautious

The dollar’s fall against the yen deepened on Thursday after minutes of the U.S. Federal Reserve’s most recent policy meeting offered little optimism over the state of global growth and the prospect of a rise in interest rates in June.

The US currency, hammered since late March by the latest retreat in expectations for any further rises in US rates, fell 1 per cent to less than 109 yen, its weakest in 17 months.

With oil up 1 per cent and the prospect of any tightening of US monetary policy receding, European stock markets scraped together some initial gains, but the mood remained fragile.

Chinese shares fell more than 1 percent and the broad Eurofirst index of Europe’s leading companies is in its fourth consecutive week of falls, down almost 10 percent since the start of January.Minutes from the

Fed’s March 15th-16th policy meeting suggested that the central bank appears unlikely to raise interest rates before June due to widespread concern among policymakers over their limited ability to counter the blow of a global economic slowdown. The minutes showed debate over whether they might increase rates in April with “a number” of them arguing that headwinds to growth would probably persist, and many urging caution about raising rates.

"While the minutes confirm that there is a lot of uncertainty in the Committee about the economic outlook, with risks tilted to the downside, it is clear that hikes are on the agenda of each meeting now," analysts at Rabobank said in a note, maintaining their prediction for two hikes this year, most likely in June and December. "From this point on, it would require a significant deterioration in the US economic outlook for the FOMC participants to remove more hikes from their anticipated trajectory for 2016," they said.

The euro was up 0.2 per cent at $1.14205, not far from a 5-1/2-month high of $1.1438 touched last week. Minutes of the last European Central Bank meeting will be released on Thursday with traders also looking to a speech later in the day by its president, Mario Draghi.

Reuters