Dollar holds onto gains, Aussie drops to US$0.71 cents

The US dollar clung to overnight gains today, after minutes from last month’s U.S. Federal Reserve meeting gave few clues about whether an even more dovish shift in its policy framework is possible in the autumn, disappointing some dollar bears, Reuters reports.

A heavily shorted greenback put on its biggest one-day surge since March after the release, hitting 93.159 against a basket of currencies, about 1 percent above Tuesday’s two-year trough. The move wiped out earlier gains made by other majors.

Speculation has been rife the Fed will adopt an average inflation target, and seek to push inflation above 2 percent to make up for years it has run below, as part of a broader policy review.

But the minutes were vague on the issue and merely said “a number” of Fed members thought it would be helpful to make a revised statement on its policy strategy at some point, without providing details or timing.

After hitting an 18-month high of US$0.7275 before the meeting, the Australian dollar  tumbled back below 72 US cents and last sat at US$0.7186. The New Zealand dollar dropped almost 1.4 percent from its intraday high to sit at US$0.6561.

The euro - the most stretched of all recent gainers on the greenback - fell by 0.7 percent overnight to trade back below US$1.19. It last sat at US$1.1841. The pound was dumped back to US$1.3103 and the dollar jumped 0.7 percent on the yen to 106.13.