Dollar weakness attributed to concerns about potential adverse effects of trade policy on the U.S. growth outlook: Fed Minutes
The dollar depreciated against many advanced foreign economy (AFE) currencies despite widening U.S.AFE yield differentials, the FOMC noted in its minutes adding that market participants generally attributed dollar weakness to concerns about potential adverse effects of trade policy on the U.S. growth outlook. Fed minutes stated that the dollar depreciated substantially against most major currencies, as the trade-weighted broad dollar index declined over 2 percent. Market contacts attributed the decline to increased foreign exchange hedging prompted by heightened policy uncertainty and concerns that trade policy could pose greater downside risks to the U.S. than to other economies. The manager noted that the dollar had depreciated even though U.S. interest rates had risen more than foreign interest rates and prices of risky assets had declined, which historically have been associated with dollar appreciation. Liquidity in foreign exchange markets deteriorated but was roughly in line with the historical relationship between liquidity and measures of market volatility.
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