Dollar Strengthens After Publication of FOMC Meeting Minutes

The dollar index rose against the other currencies in the currency basket on Wednesday (April 6) after minutes of the March meeting of the U.S. Federal Reserve revealed that Fed officials had decided to reduce the size of the balance sheet.

  • The dollar index against the six major currencies in a basket of currencies rose 0.13% to 99.5990.
  • The dollar strengthened against the yen at 123.81 yen from 123.60 yen.
  • The dollar strengthened against the Swiss franc at 0.9328 francs from 0.9292 francs.
  • The US dollar was also stronger against the Canadian dollar at 1.2519 Canadian dollars from 1.2472 Canadian dollars.
  • The euro was lower against the dollar at $1.0905 from $1.0909.
  • The pound fell to $1.3066 from $1.3081.
  • The Australian dollar fell to $0.7511 from $0.7595.

The Federal Reserve released the minutes of its March meeting on Wednesday. These show that Fed officials are in favor of a $95 billion monthly reduction in the Fed’s balance sheet. This is expected to begin at the May meeting.

The meeting minutes state that several Fed committees supported a 0.50% increase in short-term interest rates at their March 15-16 meeting. However, there are many other Fed directors who believe that the conflict between Russia and Ukraine remains uncertain, so a 0.25% rate hike is appropriate. Some Fed officials, on the other hand, see inflationary pressures as too high and likely to continue growing. Therefore, they see it as appropriate to raise interest rates once or twice by 0.50% at the next meeting.

The Fed meeting minutes reinforce the view of one of the Fed governors, Lael Brainard, who said the Fed should systematically raise interest rates and accelerate the reduction of its balance sheet from a peak of nearly $9 trillion starting in May because inflation is now too high.

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