Dollar holds weaker in Asia after Fed minutes show Trump focus
The dollar fell against the yen on Thursday in Asia following the Fed minutes as investors said that the forecast of as many as three rate hikes in 2017 is highly variable on President-elect Donald Trump getting an aggressive tax cut and spending plan through Congress.
USD/JPY changed hands at 116.44, down 0.69%, while AUD/USD traded at 0.7289 up 0.10%. As well, in Asia bitcoin hit an all-time high this week at $1,141.87, putting it near a to rival gold as a safe-haven play and highlighting political risk.
The Caixin services PMI for China rose to 53.4, a tick aboe 53.3 expected and that followed solid manufacturing figures from China as well as Japan regionally this week.
“Improved rates of new order growth were also seen across both monitored sectors in December. The pace of new business expansion accelerated to its strongest since July 2014 at manufacturing companies amid reports of improving client demand. At the same time, growth in new work at services companies quickened to a 17-month record. Subsequently, the rate of composite new order growth was the fastest since March 2013,” Caixin said in a release.
“Despite stronger expansions in activity and new work, service providers increased their payrolls at a softer pace in December. Furthermore, the latest increase in staff numbers was the slowest for three months and modest overall. Meanwhile, job shedding persisted across China’s manufacturing sector, though the rate of reduction was little-changed from November. At the composite level, employment fell slightly in December after broadly stabilising in the previous month.”
Minutes from the Federal Reserve Open Market Committee released on Wednesday from the December meeting showed that potential fiscal expansion occupied the debate on future policy.
About half of Federal Reserve policymakers incorporated an assumption of more expansive fiscal policy under the Trump Administration and nearly all agreed that the upside risks to their growth outlook had increased.
“Members agreed that there was heightened uncertainty about possible changes in fiscal and other economic policies as well as their effects,” the minutes of the Dec. 13-14 meeting said.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last quoted down 0.28% to 102.20.
Overnight, the dollar retreated from 14-year highs against a currency basket on Wednesday as investors waited minutes from the Federal Reserve’s December meeting, when it hiked interest rates for the first time in a year.
Traders were looking ahead to Friday’s U.S. nonfarm payrolls report for December for indications on solid growth in the labor market which could enable the Fed to keep pushing up interest rates.
Higher rates typically boost the dollar by making dollar assets more attractive to yield-seeking investors.