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USD: Dollar unchanged as Fed minutes weigh

H.S. Borji
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The US dollar was unchanged against a basket of currencies Thursday, as investors continued to analyze the Federal Reserve’s long-term policy outlook amid mixed US data.

The US dollar index, a weighted average of the dollar’s performance against a basket of currencies that includes the euro, yen, pound, Canadian dollar, krona and franc, was little changed at 87.66. The greenback broke lower Wednesday afternoon following the minutes of the October Federal Open Market Committee policy meetings, but eventually rebounded in the overnight session.

The minutes of the October meetings revealed an easy decision to end quantitative easing, as policymakers debated about the Fed’s long-term pledge of low interest rates. However, the minutes gave no clear indication about future interest rates, or whether the central bank would scrap its low-rate reassurance in December.

“[A]ll members but one supported concluding the Committee’s asset purchase program at the end of October,” read the minutes from the October 28-9 meetings.

“A couple of others thought that the current forward guidance might be read as suggesting an earlier date of liftoff than was likely to prove appropriate, given the outlook for inflation and the downside risks to the economy associated with the effective lower bound on interest rates,” the minutes also read.

The minutes brought the markets no closer to ascertaining the pace and timing of a first rate-hike, although policymakers acknowledged that clarifying the Fed’s approach to policy normalization would be helpful at subsequent meetings.

The USDCAD slipped Thursday, declining 0.4 percent to 1.1297. In Canadian data, wholesale sales rose 1.8 percent to $54 billion in September, a new record high.

The dollar was little changed against the Japanese yen after the USDJPY hit an overnight high of 118.97. The pair would subsequently consolidate at 118.06, declining 0.08 percent.

In US data, consumer inflation pushed higher in October, despite falling gasoline prices. So-called core consumer prices, which exclude volatile goods such as food and energy, climbed 0.2 percent, the Labor Department reported today. That was the biggest increase in five months. Year-on-year, the core consumer price index rose 1.8 percent.

Overall CPI was unchanged in October, climbing at an annual rate of 1.7 percent.

A separate report from the Labor Department showed initial jobless claims declined 2,000 to a seasonally adjusted 291,000 last week. That marked the tenth consecutive week jobless claims were below 300,000.

Meanwhile, existing home sales rose unexpectedly in October, adding further evidence the housing recovery was gaining momentum. The sale of previously-owned homes rose 1.5 percent to a seasonally adjusted annual rate of 5.26 million, the highest level in more than a year, according to the National Association of Realtors. Economists forecast no change in home re-sales in October.

The US manufacturing industry reached a ten-month low in November, as waning international demand weighed on new order growth and overall output levels. Markit’s flash index of US manufacturing activity declined from 55.9 to 54.7 in November. Economists had forecast a slight increase to 56.4.

Markit will post its final estimate of November manufacturing PMI on December 1.

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