Dollar Jumps as Federal Reserve Officials Reveal Stimulus Won’t Affect Inflation

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Dollar Jumps as Federal Reserve Officials Reveal Stimulus Won’t Affect InflationThe U.S. dollar surged on comments by the Federal Reserve officials that indicated that the monetary stimulus, which is aimed at reducing unemployment, won’t risk pushing the inflation rate higher.

The dollar rallied higher after the Federal Open Market Committee, through its minutes of its April 29-30 meeting, revealed that “it doesn’t face a trade-off between its employment and inflation objectives”. The dollar was also helped by a surge in the U.S. Treasury yields.

The greenback rose 0.3 percent to $1.3662 versus the euro. The yen fell 0.2 percent to `101.49 a dollar after earlier touching 100.82, the most since February 5. The yen rallied 0.1 percent to 138.69 a euro, after earlier rising to 138.15, the strongest level since February 6.

The Bloomberg dollar Spot Index rose 0.2 percent to 1,010.39 in mid-afternoon trading in New York.

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“I’m bullish on dollar overall,” Lennon Sweeting, a currency trader at the broker and payment provider USForex Inc in San Francisco told Bloomberg. “We’re not seeing inflation that exceeds the normalized level.”

The benchmark Treasury 10-year bond yields surged 0.04 percentage points, or four basis points to 2.55 percent. The yield had earlier touched 2.47 percent last Thursday, the weakest level since October.

The South African rand accelerated 0.4 percent to trade at 10.4088 per dollar. South Africa’s inflation rate rose to 6.1 percent last month, way past the central bank’s limit of 6 percent, fuelling speculation an interest rate hike is in the offing.

The pound rose 0.3 percent to $1.6883 after retail sales grew faster than expected. It also rose 0.6 percent to 80.86 pence against the euro, the most since January 2013. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com