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US Dollar Edges Higher Ahead of FOMC Meeting Minutes

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US Dollar Edges Higher Ahead of FOMC Meeting Minutes

The world’s most traded currency advanced cautiously Tuesday, as investors look ahead to the minutes of the latest Federal Open Market Committee policy meetings.

The US dollar index rose more than 0.2 percent to 80.84 after the nation’s trade deficit unexpectedly fell to a four-year low in November. Rising exports and weaker imports shifted the trade deficit from $39.33 billion to $34.25 billion, a drop of 12.9 percent. November witnessed the smallest deficit since October 2009, according to the Commerce Department.

The greenback advanced 0.3 percent against the Japanese yen, hitting a session high of 104.74 yen. The USDJPY pair consolidated at 104.5. Meanwhile, the US dollar soared against its northern counterpart, the loonie, gaining 116 pips to 1.0776 CAD. The USDCAD pair broke three technical resistances along the way. In Europe, the greenback tread water against the British pound, but advanced briskly against the euro, sending the EURUSD pair to 1.3617.

The foreign exchange markets will be highly active, and potentially volatile, Wednesday when the Federal Reserve publicizes the minutes of its December policy meetings. The Fed decided to begin tapering monthly bond purchases by $10 billion in December, a reflection of the stronger than forecasted employment growth during the fourth quarter. US employers added more than 400,000 payrolls in October and November combined, as the unemployment rate fell to 7 percent.

The Labor Department will report on December nonfarm payrolls on Friday, along with average hourly wages and the unemployment rate. Economists expect employers to have added more than 190,000 private payrolls last month.

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