US Dollar Near 5-Month Low on Rate Outlook; Kiwi Highest Since 2011

Sydney-Australia (Apr 10)  The dollar was 0.1 percent from a five-month low versus a basket of peers before a Federal Reserve policy maker speaks after central-bank minutes undercut prospects for an increase in interest rates.

The U.S. currency touched a two-week low versus the euro yesterday after minutes of the March policy meeting showed the Fed played down forecasts by some of its own policy makers that rates might rise faster than they previously predicted. Chicago Fed President Charles Evans will participate in a panel discussion in Washington today. New Zealand’s dollar touched its highest level since 2011 after a manufacturing index rose.

“The dollar is weak,” said Koji Iwata, the New York-based vice president of foreign-exchange trading at Mizuho Bank Ltd., a unit of Japan’s third-biggest financial group by market value. “The FOMC minutes are dovish. We thought rate hikes would come sooner, but these expectations have receded.”

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, was little changed at 1,005.81 as of 9:24 a.m. in Tokyo. It touched 1,005.10 yesterday, the lowest since Oct. 30.

The dollar traded at $1.3857 per euro from $1.3855 yesterday, when it reached $1.3862, the least since March 24. It traded at 102.05 yen from 102. Japan’s currency was at 141.42 per euro after dropping 0.6 percent to 141.32.

Fed Minutes

“Several participants noted that the increase in the median projection overstated the shift in the projections,” the minutes of the March 18-19 Federal Open Market Committee meeting showed. Some expressed concern the rate forecasts “could be misconstrued as indicating a move by the committee to a less accommodative reaction function.”

The Bloomberg Dollar Spot Index rallied 0.8 percent after Fed Chair Janet Yellen said following the meeting that the bank may start to increase interest rates “around six months” after ending its asset-buying program. The U.S. central bank cut monthly bond purchases by $10 billion to $55 billion.

The Fed is winding down stimulus it has used to support the economy, while keeping its target for overnight lending between banks in a range of zero to 0.25 percent since 2008.

“In the current circumstances, accountability and optimal policy mean we should be maintaining a large degree of accommodation for some time,” the Fed’s Evans said yesterday. “We need continued strongly accommodative monetary policy to get inflation back up to 2 percent within a reasonable time frame.”

The New Zealand dollar touched 87.34 U.S. cents, the highest since August 2011, before trading at 87.29 from 87.15 yesterday. The nation’s manufacturing expanded last month, according to the Performance of Manufacturing Index compiled by the Bank of New Zealand Ltd. and Business NZ.