Peter Nurse

Investing.com: The dollar strengthened after reaching 16-month highs following the Federal Reserve minutes that indicated a quicker tapering pace.

The Dollar Index (which tracks the greenback in relation to a basket six currencies) traded 0.1% lower at 96.733 on Wednesday, just below the high of 96.938, its highest level since July 2020.

fell 0.1% to 115.35, not far removed from the overnight high of 115.53, a level not seen since January 2017. edged 0.2% higher to 1.33485, rose 0.2% to 1.1218 after falling below 1.12 on Wednesday  and rose 0.1% to 0.7204.

The from the Fed’s meeting held in early November, when the central bank agreed to start tapering, were released on Wednesday. These showed that a number of policymakers were open to the idea of speeding up the withdrawal of the bank’s bond-buying program if inflation remained at elevated levels. This could lead to higher interest rates being introduced faster. 

At the same time, data showed that and both rose by more than forecast, while the , widely seen as the Fed’s preferred gauge of inflation, rose at its fastest rate since April in October, and rose to multi-decade highs on an annual basis. 

Mary Daly, President of the San Francisco Fed, added her bullishness about the dollar by saying Wednesday that she can see an argument being made for asset tapering to accelerate.

“We find increasing evidence of a new leg of inflationary pressures in the U.S., increasing our conviction of a hawkish shift from the Fed during 2022,” said analysts at Nordea, in a note.

There’s little in the way of news expected from the U.S. to influence the foreign exchange markets Thursday due to the Thanksgiving holiday, but the from the European Central Bank’s meeting at the end of October are due for release.

“Despite the fourth [Covid]Wave in Europe, The ECB seems determined to hold the PEPP view. [pandemic emergency purchase program] scheme will end in March,” said analysts at ING, in a note.

Elsewhere, fell 0.3% to 12.0497, with the Turkish lira rebounding to an extent after falling to record lows earlier in the week on the back of President Tayyip Erdogan defending the central bank’s recent rate cuts. This pair rose to 13.45 on Tuesday. 

Additionally, fell 0.1% to 9.1039 ahead of a meeting by the Riksbank, with investors looking to see whether Sweden’s central bank still plans to keep its policy rate at zero into 2024. After her coalition partner rejected her budget bill, Sweden’s Prime Minister had to step down.

It fell 0.1% at 328.67. The National Bank of Hungary is widely expected to raise its one-week deposit rates by another 10 basis points up to 2.60%.