The dollar extended gains after Federal Reserve officials said they might reduce their $85 billion in monthly bond purchases “in coming months” as the economy improves, minutes of their last meeting show.
The euro dropped from a four-year high versus the yen as the European Central Bank is considering a negative deposit rate if more economic stimulus is needed, according to two people with knowledge of the debate. The yen strengthened as a panel said Japan’s government-run pension fund needs restructuring. Australia’s dollar declined after the International Monetary Fund said the currency was 10 percent overvalued.
“The Fed came across less dovish,” Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co., said in phone interview. “The market is caught in this tug of war on the time line for a taper, so less-dovish minutes give a little more leverage to the camp in the market that expects the Fed to taper policy by March or sooner. That has increased the tailwind we’ve seen on the dollar.”
The Bloomberg U.S. Dollar Index, which monitors the greenback against 10 major peers, increased for the first time in four days, adding 0.5 percent to 1,020.01 yen at 2:15 p.m. in New York.
The euro declined 0.8 percent to 134.47 after earlier touching 135.95, the strongest level since October 2009. The shared currency fell 0.8 percent to $1.3425. The dollar was little changed at 100.19 yen.
Fed policy makers “generally expected that the data would prove consistent with the Committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months,” according to the record of the Federal Open Market Committee’s Oct. 29-30 gathering, released today in Washington.