Dollar Gains As Fed Minutes Indicate More Rate Hikes

(RTTNews) - The U.S. dollar firmed against its major counterparts on Wednesday amid bets the Federal Reserve will hold interest rates higher for longer to contain inflation.

The minutes from the Federal Reserve indicated this as well.

The minutes from the Federal Reserve's meeting on July 25 & 26, released this afternoon, showed "most of the central bank officials continued to see significant upside risks to inflation, which could require further tightening of monetary policy."

The minutes also showed that a few participants were hesitant to embrace further hikes, on concerns that the tightening in financial conditions since the beginning of last year could "prove more substantial than anticipated."

The central bank lifted its benchmark rate to a range of 5.25 to 5.5 percent last month, the highest level in 22 years.

A report from the Commerce Department showed new residential construction in the U.S. saw a substantial rebound in the month of July.

The Commerce Department said housing starts surged 3.9 percent to an annual rate of 1.452 million in July after plunging by 11.7 percent to a revised rate of 1.398 million in June. Economists had expected housing starts to increase to a rate of 1.448 million from the 1.434 million originally reported for the previous month.

Meanwhile, the report said building permits inched up by 0.1% to an annual rate of 1.442 million after tumbling by 3.7% to a revised rate of 1.441 million in June. Building permits, an indicator of future housing demand, were expected to climb to a rate of 1.463 million from the 1.440 million originally reported for the previous month.

The Federal Bank's report said industrial production in the U.S. fell by 0.2% in July, extending the 0.4% drop in the previous month. Manufacturing production in the U.S. decreased 0.7% in July, compared to the same month last year.

The dollar index climbed to 103.53 after the release of the Fed minutes. The index subsequently eased to 103.45, but still remained firmly above the flat line, gaining nearly 0.25%.

Against the Euro, the dollar is up at 1.0881, gaining from 1.0907. Against Pound Sterling, the dollar recovered to 1.2729 from 1.2768.

The dollar is up against the Japanese currency, fetching 146.35 yen a unit, rising from 145.58 yen. The dollar is gaining against the Aussie, firming to 0.6422 from 0.6454.

Against Swiss franc, the dollar has strengthened to CHF 0.8801, and against the Loonie, the dollar is up at C$1.3534.