20th August 2015
The US dollar was trading broadly lower on Thursday (August 20th) following the release of the minutes from the Federal Reserve’s July policy meeting.
Fed officials agreed that the US economy was nearing the point where rates could move higher, but the exact timing of any hike remains unclear.
Policymakers "judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point”, the minutes said.
The Fed has set a two per cent inflation target as one of the benchmarks for a rate hike, a level that remains elusive.
“Some participants expressed the view that the incoming information had not yet provided grounds for reasonable confidence that inflation would move back to 2 percent over the medium term and that the inflation outlook thus might not soon meet one of the conditions established by the Committee for initiating a firming of policy,” the minutes said.
The dollar index, which tracks the greenback against a basket of currencies, slid 0.7 per cent. EUR/USD advanced to 1.1162, around three cents off its August low.
Investors have been increasingly betting on a rate hike coming at the Fed’s September meeting, but the minutes seemed to indicate the US central bank is further away from pulling the trigger than many previously thought.
Persistently low oil prices and concerns about global growth mean the Fed may wait longer to raise rates.
While the dollar slid against its major peers, emerging market currencies were also down over fears about the global economy.
The Turkish lira fell to a fresh record low, while the Kazakhstan’s tenge shed more than 20 per cent overnight as the country moved to a free float.
In commodity markets, oil continued to suffer as US light crude slid towards $40 a barrel as supplies rose in North America and the Middle East.
West Texas Intermediate (WTI) shed 1.5 per cent to touch $40.30 a barrel, while Brent crude slid by a similar margin to $46.41.
Last week crude inventories in the US rose 2.6 million barrels to 456.21 million barrels, according to the Energy Information Administration.
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