Dollar falls from three-week high after Fed minutes
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) - The U.S. dollar tumbled from three-week highs on Wednesday, as minutes of the latest Federal Reserve meeting suggested the outlook for interest rates had not changed from what the Fed indicated last month after its rate hike decision.
Traders also said there was a bit of profit-taking in the greenback toward the end of the session especially in the dollar-yen currency pair. A break of support at 111 yen triggered stops all the way to 100.70 yen, they added.
The market was a bit surprised by Fed comments saying that reducing the balance sheet this year would be warranted. Overall, those remarks were viewed as negative for the dollar, analysts said.
In the minutes, the Fed said it should take steps to begin trimming its $4.5 trillion balance sheet later this year as long as economic data holds up.
"While the balance sheet commentary was a bit more hawkish than expected, the outlook for rates was more in line with what we had before," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
"If anything, modifying the balance sheet reduces the need for higher rates. That may be weighing on the dollar a little bit."
In late trading, the dollar was down 0.1 percent against the yen at 110.66 yen JPY=.
The dollar index, which tracks the U.S. currency against a basket of six peers, fell 0.1 percent at 100.45 .DXY, after hitting a three-week high. Continued...