Dollar nurses losses as Fed policymakers worry about low inflation: Reuters

SINGAPORE (Reuters) – The dollar touched a two-month low against the yen on Thursday, having tumbled after the minutes of the Federal Reserve’s latest meeting showed some policymakers were concerned about persistently low inflation in a blow to rate hawks.

The dollar eased to as low as 111.07 yen JPY= in holiday-thinned Asian trade, its weakest level since Sept. 18, and last fetched 111.22 yen, little changed from late U.S. trade on Wednesday.

Trading conditions are likely to be thinner than usual on Thursday, with Japanese financial markets shut for a public holiday and U.S. markets closed for the Thanksgiving holiday.

The greenback nursed its losses after sliding nearly 1.1 percent against the yen on Wednesday, its biggest one-day drop since mid-May.

The minutes of the Fed’s Oct.31-Nov.1 policy meeting showed that Fed policymakers expect that interest rates will have to be raised in the “near term”, reinforcing market expectations for the Fed to raise interest rates in December.

The minutes, however, also highlighted concern among some of the members over the inflation outlook, with the emphasis placed on economic data in determining the timing of future rate rises.

“I think it’s pretty conclusive now, that as we move into 2018, the Fed is going to be focusing on (low) inflation rather than growth so this is still the overriding concern,” said Stephen Innes, head of trading in Asia Pacific for Oanda in Singapore.

Against a basket of six major currencies, the dollar stood at 93.268 .DXY, languishing near a one-month low of 93.212 that had been set on Wednesday.

A Fed rate hike in December seems like a “done deal”, said Hirofumi Suzuki, an economist for Sumitomo Mitsui Banking Corporation in Singapore.

The focus will be on Fed policymakers’ views on the possible pace of rate hikes in 2018, especially after Jerome Powell takes over as Fed chair from Janet Yellen, Suzuki said.

Powell must be confirmed by the Senate before assuming his new post.

Given the debate within the Fed about low inflation, there are doubts as to just how much the U.S. central bank will be able to raise interest rates, Suzuki added.

The euro held steady at $1.1819 EUR=, after gaining 0.7 percent on Wednesday, which brought it back closer to a one-month high of $1.1862 set last week.

Besides the Fed minutes, data showing that new orders for key U.S.-made capital goods unexpectedly fell in October, had also weighed on the dollar on Wednesday.

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