Dollar around lowest levels of year before Fed minutes

London

THE US dollar hovered around its lowest levels of the year against other major currencies on Wednesday as inflation-wary traders awaited US Federal Reserve minutes, and China's tough stance on cryptocurrencies sent Bitcoin and Ether tumbling.

With data last week showing the fastest increase in US consumer prices in more than a decade, fears are growing that interest rates will be raised sooner than expected despite Federal Reserve policymakers stressing the spike is temporary.

The minutes from the Fed's most recent meeting, due later on Wednesday, are expected to confirm that policymakers think a rate hike is still in the distance, but any discordant note or hint on when their position could evolve, could have a significant market impact.

In early European trading, the dollar index fell to a low of 89.686, a level unseen since Feb 25, but gradually rose back against its basket of six major currencies. It was up 0.23 per cent at 90.019 at 1109 GMT.

Exposing the pressure mounting on prices across the global economy, UK inflation more than doubled in April to 1.5 per cent from a month earlier, raising fears the rising trend was here to stay. The British pound eased 0.3 per cent against the dollar to US$1.4165, but had reached one of its highest levels of the year earlier in the session at US$1.4200.

In South Africa, consumer price growth rose to its highest in more than a year, weakening the rand.

Canada was also due to publish consumer price data later on Wednesday, but in the meantime the greenback ticked up against the Canadian dollar to C$1.2086, still close to its weakest since May 2015.

The euro, which hit its highest against the dollar since the beginning of January at US$1.2223 earlier, retreated back to US$1.2197.

In the Southern Hemisphere, the selling pressure on commodities weighed on the Australian and New Zealand dollars, which both retreated sharply about 0.7 per cent against the dollar.

Cryptocurrencies tumbled after China banned its financial institutions and payment companies from providing services related to cryptocurrency transactions, and warned investors against speculative crypto trading.

Bitcoin briefly dropped to a three-month low of US$36,250. It was still losing 11.2 per cent at US$38,103 at 1137 GMT. Rival digital currency Ether was down about 20 per cent at US$2,690. REUTERS