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US dollar drops after Fed minutes dampen hike expectations

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The US dollar dropped Thursday as records from the Federal Reserve's last meeting dampened hopes of an imminent US interest rate hike.

[TOKYO] The US dollar dropped Thursday as records from the Federal Reserve's last meeting dampened hopes of an imminent US interest rate hike.

Minutes from the US central bank's July gathering said policymakers were keeping their "options open" but remained divided on the threat of inflation.

A hike in US borrowing costs would tend to lift the dollar by stirring demand for dollar-denominated assets, so Wednesday's minutes weighed on the unit.

The news comes after William Dudley, the influential head of the Federal Reserve's New York branch, unexpectedly hinted this week that a rate hike was possible as early as September.

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Market voices on:

"The message appears to be that as much as a September hike is a possibility, the Fed is unlikely to move until there is a consensus on the outlook for growth, hiring and inflation," Rodrigo Catril, a currency strategist at National Australia Bank, said in a commentary.

"Recent data would therefore suggest a hike is not imminent." The dollar fell as low as 99.65 yen from 100.28 yen on Wednesday in New York, before creeping back above the 100 yen level in afternoon trading.

The euro was down at 113.11 yen from 113.19 yen, while it rose to US$1.1306 from US$1.1287.

The yen has been on a tear since wild market volatility at the start of the year and Britain's June vote to quit the European Union pushed investors into the currency, seen as a safe bet in times of turmoil.

This year, the Japanese currency has surged more than 20 per cent against the dollar and about 15 per cent against the euro.

On Thursday, the dollar also fell against most higher-yielding, but riskier, emerging market units.

The Malaysian ringgit tacked on 0.5 per cent against the US unit, while the Indonesian rupiah was up 0.3 per cent and the Thai baht rose 0.2 per cent.

The South Korean won, Singapore dollar and Philippine peso also advanced.

AFP

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