US dollar steady before Fed minutes

The US dollar held steady against other major currencies on Wednesday as traders awaited minutes later in the session from the Federal Reserve’s last policy meeting to glean any potential insights on the outlook for interest rates.

The dollar index – which measures the greenback against a basket of six other currencies, including the euro and Japan’s yen – was basically flat on the day at 103.07, having held in a range of roughly 102.75-103.75 since early June.

The Federal Open Market Committee is due to release the minutes from its most recent policy meeting at 1400 EDT (1800 GMT).

Markets are pricing in an 85.2% chance that the Fed will raise rates by another quarter-point in July but have not warmed to the Fed’s message that there could be another hike later this year.

“We’ll have to see if the minutes play up to how the Fed has really driven home a hawkish message where they’re not done raising rates yet to bring down inflation,” said Joe Manimbo, senior market analyst at Convera in Washington.

“Of course, another barometer for what the Fed does will be the jobs report on Friday,” he said.

The non-farm payrolls report on Friday is expected to show the U.S. economy will have added 225,000 jobs in June, and that the unemployment rate edged down to 3.6% last month, according to a Reuters poll.

“The economy looks resilient overall, but manufacturing has been in this funk for eight months and counting and we’ll have to see if that leads the Fed to signal that it’s not far from the end of its tightening cycle,” Manimbo said.

The euro rose 0.2% at $1.090, while sterling was up 0.1% at $1.2729.

The dollar hovered around 144.165 yen, below the 145 threshold that prompted intervention by Japanese authorities last autumn. The greenback had last week briefly popped as high as 145.07 for the first time since November.

INTERVENTION RISK?

The dollar-yen rate has broadly moved in sync with the U.S. 10-year Treasury yield , which was roughly unchanged on the day at 3.868% after resuming trade following the U.S. Independence Day holiday on Tuesday.

“The market is paying attention to the potential risk of intervention, but as a medium-term trend, the market is looking for further downside for the yen,” said Shusuke Yamada, chief forex and rates strategist at Bank of America in Tokyo.

“We don’t see a very high probability that the Ministry of Finance will intervene at the same level as last year – and if the move is not rapid, below 150 we might not see intervention at all.”

Australia’s dollar fell in line with the Chinese yuan after data showed China’s services activity expanded at the slowest pace for five months in June, the latest sign of a sputtering post-pandemic recovery in the world’s second-largest economy.

The Australian dollar fell 0.1% to $0.6683, on course to snap a four-day streak of gains.

Prior to the Chinese services data, the Aussie had been slightly firmer following another stronger yuan fixing from the People’s Bank of China, fueling bets for imminent policy support from Beijing.

The yuan rebounded a touch, up 0.2% at 7.2509 .

Currency bid prices at 9:34AM (1334 GMT)