Dollar adds gains vs yen after Fed minutes; stocks higher
New York (May 21) The dollar extended gains against the yen and stocks moved higher on Wednesday after the release of minutes from the Federal Reserve's most recent meeting indicated no imminent rise in interest rates.
Minutes of the April session showed Fed staff presented several approaches to raising short-term interest rates, but said the discussion was simply "prudent planning" and not a sign rate hikes would come any time soon.
Some analysts said the minutes show the Fed's tapering of its stimulus program remains fully in place.
"The baseline scenario is still for slow, but steady improvement; there is no inflation risk and the Fed will keep tapering," said Richard Franulovich, senior currency strategist at Westpac in New York.
Fed Chair Janet Yellen said in March the U.S. central bank could raise rates six months after its bond-buying program ended.
MSCI's all-world equity index, which tracks shares in 45 nations, was up 0.5 percent, barely budging after the minutes. European shares ended up 0.6 percent.
On Wall Street, the Dow Jones industrial average was up 160.19 points, or 0.98 percent, at 16,534.50. The Standard & Poor's 500 Index was up 14.92 points, or 0.80 percent, at 1,887.75. The Nasdaq Composite Index was up 33.60 points, or 0.82 percent, at 4,130.49.
Stocks are rebounding after a sell-off on Tuesday, putting put the S&P 500 on track for its third advance in the past four days.
In the foreign exchange market, the dollar was up 0.1 percent against the yen at 101.44.
Earlier in the day, the dollar fell to a 3-1/2-month low against the yen on optimistic comments from Bank of Japan Governor Haruhiko Kuroda, who gave no hint of further monetary easing in the near term.
U.S. 10-year Treasuries pared price losses after the release of the minutes.
Benchmark 10-year Treasury notes were last down 10/32 in price to yield 2.54 percent compared with 2.509 percent late Tuesday. Earlier in the session, 10-year notes were down 10/32 in price.
"It's the same old dovish slant. The overall theme is that the Fed will continue to push until it decides not to," said Thomas Roth, executive director of U.S. government bond trading at Mitsubishi UFJ Securities USA in New York.
Oil prices rose, supported by an industry report showing U.S. crude inventories had unexpectedly fallen last week and by persistent disruption to Libya's output amid renewed fighting.
U.S. crude rose $1.70 to settle at $104.07, while Brent settled at $110.55, up 86 cents.
Earlier on Wednesday, Yellen gave a commencement address at New York University's commencement ceremony, but did not make any remarks about the economy or monetary policy.
In recent comments from Fed officials, New York Fed President William Dudley said on Tuesday that inflation should "drift upward" toward the Fed's 2 percent goal, but a swift climb in inflation was unlikely. Philadelphia Fed President Charles Plosser said the $2.5 trillion in reserves accumulated by banks could trigger more rapid inflation.