US dollar recovers losses as Fed rate hike expectations support

The US dollar recovered losses after a sharp dip following a dovish Federal Reserve on Wednesday. Markets are beginning to focus on the rate hike expectations again and the monetary divergence between the Fed and the other major central banks which are easing policies. This is giving support to the greenback.

U.S. Treasury yields rose and the dollar traded to 120.77 yen late on Thursday in New York. Hopes for early Fed action haven’t receded and some market players still believe in the possibility of June rate hike.

From now on, U.S. jobs and wage conditions, as well as inflation are important to gauging the timing of the Fed’s decision to begin the rate hike cycle.

In other news this morning, the Bank of Japan released minutes of its latest policy meeting. The market mostly shrugged off remarks from the Bank of Japan Governor Haruhiko Kuroda.

Speaking at the Foreign Correspondents’ Club of Japan, Kuroda said the BOJ is the first major central bank since the Great Depression to fight deflation, and if it succeeds, it “will strengthen confidence in central banks’ ability to achieve their price stability targets.”

Kuroda also said the central bank will make adjustments to its current policy as necessary without hesitation, when there are changes in the underlying trend in inflation.

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