FX.co ★ Dollar Rises To Near 2-year High As Fed Minutes Hint At Tighter Policy

The U.S. dollar climbed to a near 2-year high on Wednesday as minutes of the Federal Reserve's most recent monetary policy meeting raised expectations that the central bank might announce a few 50 basis point hikes in interest rates this year to rein in inflation.

The minutes showed that the meeting featured a continued discussion about reducing the size of the central bank's balance sheet, with staff presenting a range of possible options for reducing the Fed's securities holdings over time in a predictable manner, with all of the options featuring a more rapid pace of balance sheet runoff than in 2017-2019.

The Fed said participants generally agreed reducing the central bank's holdings by about $95 billion per month would likely be appropriate, reflecting monthly caps of about $60 billion for Treasury securities and about $35 billion for agency mortgage-backed securities.

The minutes showed that there was also general agreement that the caps could be phased in over a period of three months or modestly longer if market conditions warrant.

Many participants noted that one or more 50 basis point increases could be appropriate at future meetings, particularly if inflation pressures remained elevated or intensified, the Fed said.

The dollar index, which climbed to 99.77 after the release of the minutes, pared some gains subsequently and is at 99.61, up 0.13% from the previous close.

Against the Euro, the dollar is trading at $1.0899, up marginally from $1.0905.

The dollar is trading at $1.3073 against Pound sterling, after having firmed to $1.3050 soon after the release of the Fed minutes.

Against the Japanese currency, the dollar is stronger, fetching 123.79 yen, compared with 123.60 yen on Tuesday.

The dollar is at 0.7510 against the Aussie, firming from 0.7578.

The Swiss franc is trading at 0.9331 against the dollar, weakening from 0.9294. Against the Loonie, the dollar is stronger, fetching C$1.2548 a unit, up from C$1.2488.