Dollar rises as minutes shows Fed committed to supporting economic recovery

NEW YORK: The US dollar edged higher against a basket of currencies in a choppy session on Wednesday, after minutes of the Federal Reserve's March meeting showed the central bank committed to extending monetary policy support until an economic rebound in the United States was more secure.

Even as the US economy gathered steam this year, Federal Reserve officials remained cautious about the continuing risks of the pandemic and committed to pouring on monetary policy support until a rebound was more secure, the minutes showed.

"The minutes again indicated that the Fed thought it would be "some time" before officials see the necessary condition of "substantial further progress" on the dual goals on employment and inflation," Ronald Simpson, managing director, global currency analysis at Action Economics, said in a note.

The US Dollar Currency Index, which measures the greenback against a basket of six currencies, was 0.181% lower at 92.473. The index fell as low as 92.134 earlier in the session.

The dollar has appreciated this year along with Treasury yields as investors bet the United States would recover more quickly from the COVID-19 pandemic than other developed nations aided by massive fiscal and monetary stimulus.

But the dollar index's 2.5% gain in March, the biggest monthly increase since the end of 2016, prompted some traders to book profits, analysts said.

The weakness in Treasury yields after their rapid rally this year also added pressure on the dollar.

All of this has left investors wondering if the dollar weakness, which sent the currency to a near 3-year low earlier this year, may be set to resume.

"I don't think it is necessarily time to say the USD is in a downward trend, but rather some of the support it had been seeing has faded to a degree," said Stuart Cole, chief macro strategist at Equiti Capital in London.

Upbeat European data on Wednesday showing euro zone business activity bounced back to growth last month, also supported the common currency against the greenback.

The Australian dollar fell against the dollar, down 0.74% , while the New Zealand dollar was down 0.75%, both pausing their upward trajectory of the last two weeks.

The Canadian dollar also fell, hurt by a third wave of the COVID-19 pandemic in the country.

Sterling sank on Wednesday as profit-taking by traders after a strong first quarter for the British currency pulled it to a week's low against the dollar and its lowest in two weeks against the euro.