The dollar fell the most in a month as traders digested minutes from the Federal Reserve’s December meeting, while the Yuan surged to its biggest two-day advance since 2010 and the yen, euro and gold extended gains. Asian equities were lifted by rallies in Hong Kong and emerging markets.
The offshore Yuan recovered from an earlier loss to head for its fourth-straight gain of 2017, while the yen was in line for its strongest level in more than three weeks. The Hang Seng Index was also headed for the highest close in three weeks, and Singapore shares jumped the most since November. The greenback weakened as the Fed minutes highlighted concerns about the impact of a strong currency on the new U.S. administration’s stimulatory economic policies.
Uncertainty over the path of U.S. fiscal policy weighed heavily on the Fed’s discussion of the economy and the path of monetary policy when it decided to lift rates last month, minutes from that meeting showed. Despite growing attention to the risks of fiscal policy spurring faster growth than currently forecast, most on the committee reiterated that a “gradual” pace of rate hikes over the coming years would likely remain appropriate. Stocks have rallied with the dollar, while Treasuries have plunged since Trump’s election.
“President-elect Donald Trump remains an unknown factor in the growth equation even for the Federal Reserve,” said Jingyi Pan, a market strategist at IG Asia Pte based in Singapore. “A fraction of the committee members were noted to have abstained from accounting for the projected expansion in their forecasts.”