Dollar Gains Versus Peers Before Fed Minutes

The dollar strengthened versus most of its 31 major peers before the Federal Reserve releases minutes of its September meeting as investors weighed the timing of the first interest-rate increase since 2006.

The U.S. currency pared gains after Chicago Fed President Charles Evans said unemployment is too high and a stronger dollar could hurt exports. Russia’s ruble declined as data showed the central bank sold $420 million of foreign currency in its third day of interventions this month. Turkey’s lira fell as the region’s Kurds protested the government’s limited response to Islamic State militants. Australia’s dollar dropped.

“We’ve been accustomed to seeing the minutes for 18 months now more often than not conveying a more hawkish Fed,” said Richard Franulovich, the chief currency strategist for the northern hemisphere at Westpac Banking Corp. in New York. “It’s typically been a dollar-positive day, so I’m not suprised that the dollar’s firming.”

The greenback strengthened 0.1 percent to 108.08 yen as of 9:33 a.m. New York time. The Japanese currency weakened 0.1 percent to 136.96 yen per euro. The dollar was little changed at $1.2672 per euro after sliding 1.2 percent in the previous two sessions. It appreciated to $1.2501 on Oct. 3, the strongest level since August 2012.

The ForexSQ Dollar Spot Index, which tracks the greenback against 10 major currencies, was little changed at 1,067.08, after sliding the last two days.
Russia Intervention

Russia’s currency slid as data showed the nation’s monetary authority spent funds on Oct. 6 to shore up the ruble. The bank also said it shifted the upper boundary of the currency’s trading band by 5 kopeks yesterday.

President Vladimir Putin is under pressure as the U.S. and European Union impose sanctions on the economy and investors pull money out of the country. Bank of Russia will probably need to spend as much as $30 billion by year-end to slow the decline in the currency, which lost 14 percent against the dollar last quarter, according to UralSib Capital.

The ruble dropped for the ninth time in 10 days against a euro-dollar basket, sliding 0.3 percent to 44.8338.

The lira fell as demonstrators fought with police and, in some areas, with members of local Islamist groups, according to Turkish media. The outpouring of anger came as Syrian Kurdish fighters failed to stop Islamic State advancing through the outskirts of Kobani, a mainly Kurdish town that militants besieged three weeks ago.

The lira weakened for a second day, dropping 0.5 percent to 2.2867 versus the dollar.
Australia Jobs

Australia’s statistics bureau said seasonally adjusted jobs estimates will be revised so they are the same as the original series for July, August and for the September data due tomorrow. The bureau came under scrutiny after unemployment jumped from 6.1 percent to a 12-year high of 6.4 percent in July, then retraced the gain in August, when a record 121,000 jobs were added under the seasonally adjusted measure.

The Aussie dropped 0.4 percent to 87.84 U.S. cents, snapping two days of gains.

The currency has advanced 0.5 percent in the past week, the second best-performer after the yen among 10 developed-nation currencies tracked by ForexSQ Correlation-Weighted Indexes. The yen gained 0.8 percent, the euro added 0.4 percent while the dollar was little changed.
Fed Minutes

The Fed, which next meets on Oct. 28-29, is on track to end a program of stimulatory bond purchases this month. Futures trading showed about a 68 percent likelihood that the central bank will increase borrowing costs to 0.5 percent or higher next September. The Fed releases the minutes of its Sept. 16-17 meeting today.

“The minutes are very much in focus,” said Michael Sneyd, a foreign-exchange strategist at BNP Paribas SA in London. “If we hadn’t had the selloff in the dollar in the past few days we’d be a bit cautious but, because we had that selloff, they could provide a bit of a catalyst.”

Evans said today that he is “very uncomfortable with calls to raise our policy rate sooner than later,” and any rate increases should be relatively shallow for some time. A stronger dollar could hold down inflation and hit exports, he said in remarks prepared for delivery in a speech in Plymouth, Wisconsin.

Forecasts for the Fed to raise interest rates in mid-2015 are “reasonable,” New York Fed President William C. Dudley said yesterday.

The target rate has been maintained in a range of zero to 0.25 percent since December 2008 to support the economy.