collected by :Irax John
Earlier, the dollar strengthened slightly against the euro, the yen and emerging-market currencies, as geopolitical tensions escalated ahead of the Group of 20 summit in Germany later this week.
Since 2009 the Fed had bought government bonds swelling its balance sheet to $4.5 trillion during quantitative-easing programs to stimulate the economy.
Gradually reducing the balance sheet by not reinvesting the proceeds and letting maturing bonds expire, the Fed can effectively tighten monetary policy.
The ICE Dollar Index DXY, -0.13% which measures the greenback against a basket of six rival currencies, pared earlier gains to trade 0.1% higher at 96.2600.
Analysts believe that reducing the balance sheet will push borrowing rates and the dollar higher, but possibly in a less aggressive way than an outright rate increase, market analysts say.
America Dollar might increase if ISM, ADP Data Stoke Federal Rate Hike Bets
according to Upbeat results echoing recently improving US news-flow may amplify rate hike speculation and boost the US Dollar.
Futures markets now imply a better-than-even chance of another rate hike before year-end, an outcome seen as unlikely just a week ago.
Talking Points:Yen higher on anti-risk flows as Asian stock markets swoonUS Dollar may rise if ADP, services ISM data outperformMinutes from June ECB meeting may stoke Euro volatilityThe Japanese Yen outperformed in otherwise quiet Asian trade.
Minutes from June’s ECB meeting may also make a splash.
Newswires attributed the sour mood to worries about further Fed tightening after minutes form the FOMC’s June meeting struck a hawkish tone.
Dollar Pares increases next Federal Minutes detect Balance-Sheet Divide
It pared gains as Treasuries rallied amid little sign of urgency in the Fed’s time line for beginning its balance-sheet adjustment.
The dollar pared gains to trade little changed after Federal Reserve minutes left the timing of balance-sheet normalization uncertain and still suggested the central bank plans to maintain gradual rate hikes.
With FOMC minutes out of the way, focus will turn to Thursday’s ADP data release and Friday’s jobs report.
Still-firm rates kept emerging market FX defensive and added to weakness derived from domestic considerations for some pairs, including the South Africa rand.
The greenback was mixed versus G-10 peers and gained against most emerging currency markets.