Written by Kevin Buckland
TOKYO (Reuters) – The dollar hovered near a one-week high on Thursday after its best day this month against its major counterparts after minutes of the Federal Reserve's latest meeting revealed some officials were prepared to raise interest rates.
The New Zealand dollar continued to rise as an unexpected rise in domestic retail sales added to hawkish guidance from the central bank the day before to head off bets on an interest rate cut.
Sterling remained steady after jumping to a one-month high in the wake of hotter-than-expected inflation, and was also supported by the announcement of the UK parliamentary elections on July 4.
Ethereum continued to hover near Tuesday's high for more than two months amid speculation about the potential approval of U.S. exchange-traded funds that would follow the world's second-largest cryptocurrency.
The index, which tracks the currency against six major rivals including the pound, the euro and the yen, was little changed at 104.85 after rising 0.28% overnight.
Fed officials indicated at their April 30-May 1 session that they remain confident that price pressures will ease, albeit slowly, but the meeting summary also reflects discussion of the potential for monetary policy tightening.
“The minutes revealed concerns that inflation may not fall as quickly as hoped and that some members are open to further rate hikes if necessary,” James Knifton, senior corporate FX trader at Convera, wrote in a note to clients.
“Consequently, expectations for the first rate cut have shifted from September to November. With the Fed meeting taking place immediately after the US elections, early November could see significant market volatility.”
There was little change in the dollar at 156.755 yen after it rose to 156.85 overnight, the highest level since May 1, even as traders worried about the risks of Japanese authorities intervening to support the currency.
Nearly half of Japanese companies find a fall in the yen's value beyond 155 yen to the dollar hurting their business, a Reuters survey showed on Thursday, roughly double the percentage of those who view a weaker currency as a positive.
To counter the yen's decline, 37% of respondents wanted the central bank to raise interest rates again, while 34% wanted the government to intervene in the foreign exchange market.
The euro rose 0.08 percent to $1.08305, but remained close to its lowest levels overnight at $1.08175.
The pound remained steady at $1.2723, after rising to $1.27610 on Wednesday for the first time since March 21, as inflation crushed bets on a Bank of England cut in June.
Meanwhile, Prime Minister Rishi Sunak has called a national election, which the Conservatives are widely expected to lose to the opposition Labor Party after 14 years in power.
“A Labor win with prospects for a softer Brexit is GBP+, especially against the euro,” TD Securities analysts wrote in a note.
“However, sterling is likely to trade only at this level around election time as inflation and interest rate variation remain the primary drivers of the currency market, especially in the first cuts.”
It added 0.4% to $0.6121 after data released on Thursday showed New Zealand retail sales volumes rose 0.5% in the first quarter, missing expectations for a slight decline.
On Wednesday, the Reserve Bank of New Zealand surprised markets by raising its forecast for a peak in interest rates and backing away from a forecast for a rate cut.
Among cryptocurrencies, ether was trading at around $3,769, slightly higher than Wednesday's close. It rose to $3,838.80 on Tuesday for the first time since March 15.
Bigger rival Bitcoin was little changed at $69,432 after hitting $71,957 on Tuesday for the first time since April 9.
