Dollar Stays Weak Despite Paring Some Early Losses

(RTTNews) - The U.S. dollar traded weak against most of its major counterparts on Wednesday with traders focusing on the minutes of the Federal Reserve's December meeting for clues on the bank's monetary policy outlook.

Traders also digested the data from the Institute of Supply Management showing U.S. manufacturing activity contracted at a slightly faster rate in the month of December.

The ISM said its manufacturing PMI edged down to 48.4 in December from 49.0 in November, with a reading below 50 indicating a contraction. Economists had expected the index to slip to 48.5.

Manufacturing activity contracted for the second consecutive month after expanding for 29 straight months, with the manufacturing PMI falling to its lowest level since hitting 43.5 in May 2020.

The minutes from the Federal Reserve's most recent policy meeting reinforced expectations the central bank is likely to continuing raising interest rates.

The minutes reiterated that officials continue to anticipate that ongoing rate increases would be appropriate to achieve the Fed's dual objectives of maximum employment and price stability.

The Fed noted that the pace of future rate hikes would take into account the cumulative tightening of monetary policy, the lags with which policy affects economic activity and inflation, and economic and financial developments.

"Participants generally observed that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to 2 percent, which was likely to take some time," the Fed said.

The central bank added, "In view of the persistent and unacceptably high level of inflation, several participants commented that historical experience cautioned against prematurely loosening monetary policy."

The dollar index, which dropped to 103.83 in the Asian session, was last seen at 104.25, down nearly 0.3% from the previous close.

Against the Euro, the dollar weakened to 1.0606, and against Pound Sterling, it dropped to 1.2054 from around 1.2000, but firmed against the Japanese currency, fetching 132.63 yen a unit as against the previous close of about 131.00 yen a unit.