USD Turns Lower After Initial Gain as Dovish Fed Minutes Offset Safe-Haven Demand

The US dollar edged lower on Wednesday (8th), initially supported by safe-haven demand as tensions escalated between Washington and Tehran, but later retreated as the release of the Federal Reserve (Fed) meeting minutes revealed policymakers' divided views on the monetary policy outlook, offsetting safe-haven buying.

In late New York trading, the dollar index (DXY), which tracks the greenback against six major currencies, fell 0.1% to 100.99.

The Fed's June meeting minutes, released Wednesday, indicated that US monetary policymakers see high uncertainty regarding the interest rate outlook and discussed multiple possible scenarios, including fading inflation pressures or sustained high levels.

During the June 16–17 meeting, participants noted that inflation remains elevated, partly due to energy supply shocks from Middle East conflicts pushing prices higher. A few officials argued for an immediate rate hike.

Overall interest rate discussions appeared highly divided, with a 'majority' of officials suggesting that under certain conditions, inflation could naturally fall toward the Fed's 2% target.

The minutes stated, 'However, many participants also noted that inflation could remain elevated due to strong AI-related demand, Middle East conflicts, or tariff impacts, even against a backdrop of stable labor market conditions. In such scenarios, nearly all these participants indicated that further policy tightening might be necessary to bring inflation back to 2%.'

Adam Crisafulli of Vital Knowledge said, 'The most notable aspect of the minutes is the surprisingly dovish tone regarding the monetary policy outlook. The description of current inflation is hawkish, and some officials saw a case for a rate hike last month. But looking ahead, it sounds more like officials are contemplating rate cuts rather than further tightening.'

He added, 'In content, the minutes still contain plenty of hawkish language, but overall, the tone is more dovish than many expected following the June policy statement and press conference.'

These are the first meeting minutes released since Kevin Warsh took office as the new Fed Chair. The Fed held the federal funds rate steady at 3.50%–3.75% last month, as widely expected. More notably, the central bank's updated dot plot was clearly hawkish, with half of the participating policymakers forecasting a rate hike this year.

Elsewhere among major currencies, the New Zealand dollar rose 0.4% against the US dollar to 0.5699, after the Reserve Bank of New Zealand hiked rates by 25 basis points as expected and signaled that further tightening might still be needed to bring inflation back to target.

The Australian dollar edged higher, reaching 0.6930 against the US dollar.

The Japanese yen weakened, with USD/JPY rising 0.4% to 162.62, keeping the yen deep within a zone that could trigger Japanese government intervention.

Bank of Japan (BoJ) board member Toichiro Asada reiterated that clearer evidence of 'demand-driven inflation' is needed before supporting further rate hikes, reinforcing market expectations that the BoJ will proceed gradually with policy normalization.

As of approximately 5:50 AM Taiwan time Thursday (9th), exchange rates were:

DXY: 101.0526 (-0.0177%) EUR/USD: 1.1417 (+0.0088%) GBP/USD: 1.3387 (-0.0149%) AUD/USD: 0.6929 (-0.0144%) USD/CAD: 1.4173 (0.0000%) USD/JPY: 162.5500 (-0.0430%)