By James Ramage
The dollar jumped against the euro and yen on Wednesday after
minutes from the most recent meeting of the Federal Open Market
Committee showed the central bank was gradually shifting its stance
in a more hawkish direction.
The greenback rose 0.8% versus the yen to ¥103.71, its highest
since April 4. The euro dropped 0.4% against the dollar to $1.3264,
an 11-month low.
The minutes showed that FOMC members saw labor-market progress
and increases in inflation accelerating in a manner that was
bringing conditions closer to normal or those before the financial
crisis. There were clear disagreements regarding how much slack
remained in the labor market, a key gauge along with consumer
prices, that the Federal Reserve uses to assess the state of the
U.S. economy.
Amid growing debate among committee members, the Fed appears to
be shifting away from a dovish view and toward a more balanced one,
in the process sounding more hawkish than it did before, said Omer
Esiner, chief market analyst at the currency brokerage Commonwealth
Foreign Exchange Inc. The move brings the U.S. central bank closer
to a point when it will consider raising interest rates, which
would boost the dollar, he said.
"It's too early to suggest rates may rise sooner than expected,"
Mr. Esiner said. "But the consensus view of the Fed is shifting to
the center, part of the process of the Fed normalizing its stance,
which is fundamentally positive for the dollar."
The statement from the last FOMC meeting, which concluded July
30, showed little change in monetary policy at the central bank.
The Fed moved closer to ending its bond-buying program but gave
little indication about its plans or schedule for raising interest
rates. Investors hoped the minutes would illuminate how the debate
among Fed officials on rates is progressing.
Investors are looking ahead to the Jackson Hole gathering of
global central bankers, where Federal Reserve Chairwoman Janet
Yellen will speak Friday. The market seeks further indications that
the central bank is shifting its thinking about the U.S. economy
and its schedule for raising rates. Higher interest rates would
benefit the dollar, as investors would receive greater returns from
dollar-denominated assets.
The dollar index, which compares on a weighted basis the dollar
against a basket of six of the most heavily traded currencies,
gained 0.4% on the day, reaching its highest point since September.
In addition to the euro and yen, the greenback gained against the
British pound, reaching its strongest level in four months, at
$1.6599, and versus the Swiss franc, at 0.9134 franc, the highest
level since late January.
-- Write to James Ramage at james.ramage@wsj.com