Investing.com – The U.S. dollar gave back some of its gains from the previous session on Thursday but remained near a one-week high after the release of hawkish minutes from the Federal Reserve’s latest meeting, which said U.S. interest rates will remain elevated for some time.
At 04:20 ET (0820 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 104.705, after rising 0.3% overnight.
Dollar strengthens thanks to hawkish Fed protocols
The Fed’s meeting in late April showed policymakers increasingly concerned about persistent inflation, with some Fed officials talking about potentially further rate hikes to reduce inflation.
“While the general consensus was that the policy was ‘well thought out’, many members were prepared for a larger increase if necessary. Incidentally, “many” participants questioned whether the policy was restrictive enough,” ING said.
Several Fed officials subsequently warned about inflation levels in remarks after the meeting.
But the Fed remains unlikely to raise interest rates further, and so markets are now pricing in a greater likelihood that the central bank will keep rates high for longer.
The Atlanta Fed chairman will speak later in the session, and traders will be paying attention to his comments, as well as May data, for further clues.
Sterling maintains firm tone following election news
In Europe, it rose 0.1% to 1.2730, with sterling maintaining a firm tone after data on Wednesday showed UK inflation fell less than expected in April.
Prime Minister Rishi Sunak has called a national election in which his Conservative Party is widely expected to lose to the opposition Labor Party after 14 years in power.
“This news appears to have had only a minor impact on sterling,” ING said, as “crucially many of the volatility-inducing events that have been associated with UK policy in previous years (UK-EU trade relations, unfunded budget) ) spending, Scottish referendum) seem to be fairly minor risks now.”
traded 0.2% higher at 1.0839 after data showed eurozone business activity grew at its fastest pace in a year this month.
The preliminary HCOB index rose to 52.3 this month from 51.7 in April, beating expectations for a more modest rise to 52.0, supported by buoyant demand for services, while the manufacturing sector showed signs of moving toward recovery.
The European Central Bank has largely confirmed it will begin a cycle of rate cuts next month, and discussions are currently underway about how many more cuts, if any, policymakers will agree to this year.
Yen unchanged despite improved PMI
In Asia, the index was little changed at 156.76 after the overnight trade index surged to nearly 157, while data from Japan showed manufacturing activity rising for the first time in 11 months.
traded 0.1% higher at 7.2443, trading just below a six-month high.
Beijing was seen banning some US firms from engaging in China-related trade activities and also banning some arms shipments to Taiwan. The move was seen as a response to higher US tariffs on key Chinese industries, which will take effect on August 1.
China has also conducted military exercises near Taiwanese territory, heightening concerns about rising tensions in the area.