NEW YORK (Reuters) - The U.S. dollar pared most of its gains against a basket of major currencies on Wednesday after minutes from the Federal Reserve’s January policy meeting were viewed as dovish, while optimism surrounding Greece capped the euro’s losses.
The dollar stumbled against the Japanese yen and pared most of its gains against the euro after the minutes showed that Fed policymakers expressed concern that raising interest rates too soon could pour cold water on the U.S. economic recovery, and fretted over the impact of dropping “patient” from the central bank’s interest rate guidance.
The dollar’s value against the yen was hurt by a drop in U.S. Treasury yields after the minutes, which hurt the greenback by discouraging investment flows into the United States, analysts said.
“These minutes seem to suggest that the Fed was in no hurry whatsoever to begin hiking,” said Steven Englander, global head of G10 FX strategy at CitiFX in New York. He said that persistent belief in a Fed rate hike this year, however, kept the dollar slightly higher against the euro.
Rising U.S. yields support the dollar by driving investment flows into the United States.
Optimism that Greece would reach a debt deal with its international lenders kept the euro from depreciating dramatically against the dollar. The Greek government confirmed it would ask for an extension of its loan agreement on Wednesday.
“There’s a strong presumption now that Greece and the Eurogroup will find some language which essentially extends the program,” Englander said in reference to Greece’s bailout program.
The dollar and the euro hit their highest levels against the Swiss franc since the Swiss National Bank scrapped its 1.20 francs per euro cap on Jan. 15, meanwhile, with analysts citing persistent speculation that the SNB was intervening to weaken the franc.
“The SNB will try to give Swiss corporations a competitive advantage to increase exports via currency intervention,” said Alfonso Esparza, senior currency Strategist at Oanda in Toronto.
The dollar was last down 0.45 percent against the yen at 118.700 yen JPY=EBS.
The euro was last down 0.13 percent against the dollar at $1.13935 EUR=EBS. The dollar was last up 0.57 percent against the franc at 0.94210 franc CHF=EBS. The dollar index, which measures the greenback against a basket of six major currencies, was last up 0.06 percent at 94.112 .DXY.
Reporting by Sam Forgione; Editing by Meredith Mazzilli and Chizu Nomiyama