May 25, 2017 / 12:25 AM / 2 years ago

Dollar steady as commodity currencies slip on oil price drop

NEW YORK (Reuters) - The dollar steadied against a basket of major currencies on Thursday, a day after Federal Reserve minutes that dialed down some expectations of the central bank hiking interest rates soon.

U.S. dollar and Euro bank notes are photographed in Frankfurt, Germany, in this illustration picture taken May 7, 2017. REUTERS/Kai Pfaffenbach/Illustration

The dollar index .DXY, which tracks the greenback against six major rivals, was down 0.04 percent to 97.197, after falling as low as 96.88 earlier.

“We are seeing a little bit of softness in the dollar on a trade-weighted basis after yesterday’s Fed minutes,” said Karl Schamotta, director of global product and market strategy at Cambridge Global Payments in Toronto.

Wednesday’s release of minutes from the Fed’s last policy meeting showed policymakers agreeing they should hold off on raising interest rates until it was clear a recent U.S. economic slowdown was temporary, though most said a hike was coming soon.

“The core thing that came out of the minutes was this idea that the Fed is going to maintain the balance sheet for a long period of time at the level it is at,” said Schamotta.

“The idea of rapid normalization is off the table for now.”

On Thursday, data on weekly jobless claims highlighted brightening prospects for the U.S. economy and helped steady the dollar index.

Comments from Federal Reserve Governor Lael Brainard saying that a brighter global economy is posing less risk to the Fed’s outlook for the United States, also helped boost risk sentiment, Schamotta said.

The greenback gained against commodity currencies as oil prices fell about 4 percent after OPEC’s decision to extend production curbs fell short of expectations of deeper or longer cuts.

The Canadian dollar weakened against its U.S. counterpart, pulling back from a five-week high. [nL1N1IR0NQ]

The Australian dollar fell 0.63 percent against the greenback to $0.7455 AUD=, still bruised after news earlier this week that major commodities importer China had its sovereign debt rating cut.

General softness in commodities, including weakness in iron ore prices, were a drag on the Aussie’s performance, Shaun Osborne, chief FX strategist at Scotiabank in Toronto, said.

Meanwhile, sterling slipped against both the dollar and the euro after data showed Britain’s economy slowed more than previously thought in the first quarter of this year.

The pound was 0.26 percent lower against the dollar at $1.2939.

Reporting by Saqib Iqbal Ahmed; Editing by Andrea Ricci and Lisa Shumaker

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