LONDON: Currencies were in focus on Thursday as traders weighed the intentions of central banks on raising interest rates and pulling money out of markets.
The dollar began to recover after falling in the wake of Federal Reserve minutes released Wednesday that hinted at a slower pace of US interest rates.
Meanwhile the euro slid after the minutes of the latest ECB meeting showed policymakers are concerned with the recent rise in the value of the euro, which has climbed nearly 10 percent against the dollar this year -- and much of that since the end of June.
"With the ECB becoming worried about a high exchange rate, one has to wonder whether they will now put their QE tapering plans on hold until central banks of the eurozone's largest trading partners start tightening their policies," said technical analyst Fawad Razaqzada at currency trading firm FOREX.com.
Under QE, or quantitative easing, the ECB and the Fed bought trillions of debt to prop up economic activity during and after the global economic crisis.
The Fed has signalled it will soon begin pulling some of that money out of the market while the ECB is expected to announce how it will wind down its purchases.
While the minutes from the Fed's July meeting indicated that it will likely continue with plans to begin removing some money from the markets, the likelihood of a third interest rate hike this year is more uncertain as some members of the US central bank argued it could afford to "be patient" before raising rates again amid persistently weak inflation.
- White House 'dysfunction' weighs -
"US dollar weakness followed the release of minutes that indicated 'many' members feared inflation will stay lower for longer," said Michael McCarthy, chief market strategist at CMC Markets.
European stock markets fell slightly, with London's benchmark FTSE 100 index and Paris's CAC 40 index both down 0.4 percent in afternoon trading. The DAX 30 in Frankfurt slid by 0.3 percent.
In Japan, the Nikkei ended marginally down with automakers and banks in retreat, with Japanese shares dragged lower in part by a firm yen.
Wall Street stocks opened lower, with the Dow sliding 0.2 percent to drop back under the 22,000 points level.
"US stocks are lower in early action, with the global markets grappling with monetary policy uncertainty on both sides of the pond, as well as the exacerbated dysfunction in the White House," said analysts at Charles Schwab brokerage.
On Wednesday, the Dow shrugged off developments in Washington to rise above 22,000 points, even as US President Donald Trump disbanded a pair of business advisory boards after several chief executives resigned over his widely criticised response to a white supremacist rally in Charlottesville.
"If you thought the president lacked the necessary key back room operators to implement the White House economic agenda, well things just got worse," said Oanda analyst Stephen Innes.
"Predictably the dollar sagged, and safe havens (such as the yen) were back in vogue."
On commodities markets, crude prices drifted down following a sharp decline overnight after official data showed US production climbed to the highest level in more than two years, heightening worries about a supply glut.
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