Dollar falls to one-month lows for “few surprises” after the Fed meeting

The yuan crossed a key threshold and hit a one-week low against the dollar as investors were disappointed that a rare high-level meeting involving Premier Li Keqiang to support the economy failed to lead to new political measures. The offshore yuan fell more than half a percentage point to 6.75 yuan per dollar.

The euro was up 0.35% at $1.0716, while the dollar was down 0.4% against its Japanese pair at 126.76 yen. Risk-sensitive currencies such as the Australian dollar, the New Zealand ‘kiwi’ and the Canadian ‘loonie’ were trading virtually unchanged against the dollar.

Sterling hit a three-week high at $1.26165.

All participants in the Federal Reserve’s monetary policy meeting on May 3-4 supported a half percentage point hike in interest rates to combat inflation thatthey coincided, had become a threat to the economy and was at risk of rising without central bank interventionaccording to the minutes of the session.

This month’s 50 basis point rate hike was the first of that size in more than 20 years and has put the Fed on the path of rapid monetary tightening, with “a majority of authorities” judging that further half-point hikes are “likely to be appropriate” at the June and July meetings, according to the minutes, They were published this Wednesday.

“All participants agreed that the US economy was very strong, the labor market was extremely tight, and inflation was very high.”according to the minutes, with “upside” risks of even faster inflation given ongoing global supply problems, the war in Ukraine and continued coronavirus lockdowns in China.

“Several” Fed officials said the data had begun to indicate that inflation “might stop getting worse.” But even they agreed that it was “too soon to be confident that inflation had peaked.”