· The dollar gained against the yen and cut losses versus the euro on Wednesday after the Federal Reserve, in the minutes of its latest policy meeting, said the U.S. economy and its labor market remained strong, prompting some expectations of at least one more interest rate hike this year.
Before the release of the minutes, the dollar traded lower on the day.
The Fed also emphasized the need for patience when it comes to monetary policy, noting that pausing U.S. rate hikes last month posed little risk and plenty of benefit, giving U.S. central bank policymakers time to observe the effects of past rate hikes as they assess the effects of a global slowdown.
In afternoon trading, the dollar rose 0.17 percent against the yen to 110.8 yen. The yen weakened earlier after Japanese exports in January fell the most in two years.
The euro, meanwhile, was little changed versus the greenback at $1.1346 after trading higher for most of the session.
The dollar, measured against a basket of currencies, was flat at 96.47, still below a two-month high hit last week.
· The Federal Reserve on Wednesday signaled they will soon lay out a plan to stop letting go of $4 trillion in bonds and other assets, but policymakers are still debating how long their newly adopted “patient” stance on U.S. rates policy will last.
For now, policymakers see little risk to leaving interest rates alone while they take time to assess rising risks, including a global slowdown, according to the Fed’s minutes from their Jan. 29-30 meeting, released on Wednesday.
Though “several” participants thought a rate increase would be necessary only if inflation unexpectedly surged, “several other participants indicated that, if the economy evolved as they expected, they would view it as appropriate to raise the target range for the federal funds rate later this year.”
Those split views suggest that the central bank may not yet have ended its three-year campaign to raise interest rates, but has merely put it on an extended pause. In January the Fed surprised markets by saying it would be patient about adjusting its target range for short-term interest rates, now between 2.25 percent and 2.5 percent.
· Federal Reserve officials discussed at their meeting three weeks ago ending the reduction of bonds on the central bank's balance sheet before the end of 2019, according to minutes released Wednesday.
"Almost all participants thought that it would be desirable to announce before too long a plan to stop reducing the Federal Reserve's asset holdings later this year. Such an announcement would provide more certainty about the process for completing the normalization of the size of the Federal Reserve's balance sheet," the document said.
The minutes showed extensive discussion of market conditions, particularly on the emphasis that Fed actions were having on prices of risky assets like stocks and corporate bonds.
· Democrats in the U.S. House of Representatives plan to introduce a resolution on Friday to end President Donald Trump’s national emergency declaration on border security, according to aides to Representative Joaquin Castro.
So far, 92 lawmakers have joined Castro in backing the legislation, which under House rules could advance within weeks to a debate by the full chamber, which is controlled by Democrats.
Trump declared a national emergency last week in order to take money Congress had appropriated for other activities and use it to build a wall on the U.S.-Mexico border.
Both the House and the Republican-led Senate could pass a resolution terminating the emergency by majority vote. However, any such measure would then go to Trump, who would likely veto it. Overriding the veto would require a two-thirds vote in both chambers.
· British Prime Minister Theresa May held “constructive” talks in Brussels on Wednesday as she sought concessions on Brexit from a skeptical European Union, her strategy under strain after the defection of three lawmakers.
· Britain’s opposition Labour leader Jeremy Corbyn will meet European leaders in Brussels on Thursday to discuss how to try to break the deadlock over Brexit and seek to reassure them that parliament does not want to leave without a deal.
· Fitch Ratings said on Wednesday it may downgrade the United Kingdom’s ‘AA’ debt rating based on growing uncertainty about the negotiations between Britain and the European Union over the nation’s departure from the economic bloc next month.
· Japanese manufacturing activity contracted in February for the first time in two-and-a-half years as factories cut back output amid shrinking domestic and export orders, a private business survey showed on Thursday.
The survey also showed business confidence in Japan soured for the first time in more than six years, highlighting the growing toll that the U.S.-China trade war is inflicting on Asia’s export-reliant economies and global manufacturing.
The Flash Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 48.5 in February from a final 50.3 in January.
The index fell below the 50 threshold that separates contraction from expansion for the first time since August 2016.
· Oil prices rose on Wednesday, hitting their highest this year, on hopes that the market will balance later this year.
Crude futures were helped by output cuts from top producers, as well as U.S. sanctions on OPEC members Iran and Venezuela. Prices were also supported by strong equity markets after signs of progress in trade talks between the United States and China.
U.S. President Donald Trump said negotiations with China were going well and suggested he was open to extending the deadline to complete them beyond March 1, when tariffs on $200 billion worth of Chinese imports are scheduled to rise to 25 percent from 10 percent.
Brent crude futures rose 63 cents, or 1 percent, to $67.08 a barrel around 2:30 p.m. ET. The international benchmark rose as high as $67.38 on Wednesday, surpassing Monday's high for the year of $66.83.
U.S. West Texas Intermediate crude futures ended Wednesday's session 83 cents higher at $56.92 a barrel, posting a 1.5 percent gain and the best close since Nov. 12. WTI earlier hit $57.55, a new intraday high going back to Nov. 16.
Reference: CNBC, Reuters
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