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US dollar sinks on Fed's inflation concern, rate path

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The US dollar tumbled after minutes from the latest Federal Reserve meeting highlighted how some officials expect inflation to remain low, a dovish tilt that showed divisions over the future path for US monetary policy. Stock-index futures pointed to a mixed start to Asian trading.

[SYDNEY] - The US dollar tumbled after minutes from the latest Federal Reserve meeting highlighted how some officials expect inflation to remain low, a dovish tilt that showed divisions over the future path for US monetary policy. Stock-index futures pointed to a mixed start to Asian trading.

The Bloomberg dollar spot index fell to the lowest level since October and Treasuries added to gains, pushing the 10-year yield to 2.32 per cent. Volumes were low in US equity trading ahead of the Thanksgiving holiday, with the S&P 500 Index closing down a tad below the 2,600 level that it breached for the first time Tuesday. Gold and oil surged.

The yen rose to a nine-week high against the dollar. The euro gained as efforts continued to end Germany's political impasse. Chancellor Angela Merkel's party is betting on a revived alliance with the Social Democrats to dodge the risk of new elections after coalition talks with two other parties broke down, according to people familiar with discussions in Berlin.

The Bloomberg Dollar Spot Index dropped 0.7 per cent. The euro rose 0.7 per cent to US$1.1823. The pound gained 0.6 per cent to US$1.3325, hitting its strongest in almost eight weeks.

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The yen climbed 1.1 per cent to 111.18 per dollar.

Gold rose 0.9 per cent to US$1,291.97 an ounce.

West Texas Intermediate crude rose 2.2 percent to $58.06 a barrel as U.S. crude stockpiles declined.

Fed meeting minutes showed several policy makers were concerned about soft inflation, though many still saw a "near term" rate hike as warranted. Equities remain on track to close out the year near all-time highs with investors in the stock market optimistic about global growth and company earnings.

Japan and US markets are closed on Thursday for a holiday, while South Korean markets open later than usual due to school exams.

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