U.S. Dollar Plummets to Two-month Lows versus Yen after Dovish Fed Meeting Minutes

The U.S. dollar hit a two month low versus its Japanese counterpart on Thursday after having stumbled overnight due to the minutes of the Federal Reserve’s latest meeting which triggered speculation that the U.S. central bank might not tighten U.S. policy as aggressively as previously thought.

The greenback dropped 0.1 percent against the yen in early European trading session on Thursday, sending the pair USD/JPY to as low as 111.150 – the weakest level since September 20th. The pair plunged by as much as 0.7 percent on Wednesday, marking the largest single-day fall since May.

The minutes of the Fed’s last meeting showed some of the central bank’s policymakers were concerned about persistently low inflation. Meanwhile, Fed Chair Janet Yellen on Thursday said that she was also uncertain about the outlook for inflation.

Although a move of the Fed raising rates to between 1.25 and 1.5 percent in December is still almost fully priced in, markets pared back pricing for more hikes next year. Indeed, Fed fund futures indicated that market participants only forecast the rate to rise to as high as 1.75 percent by the end of next year.

Today Japanese financial markets shut for a public holiday while U.S. markets will be closed for the Thanksgiving holiday. Therefore, trading conditions were thinner than usual.

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