The dollar rebounded from recent lows on Thursday, maintaining its upward momentum following the release of minutes from the Federal Reserve. The documents indicated that policymakers are not in a hurry to reduce interest rates, with several members expressing willingness to consider rate hikes if inflation remains persistent. U.S. yields experienced an uptick, while the dollar maintained its overnight strength against the euro and yen during early trading in Asia, keeping the euro under the $1.18 mark. The Australian dollar remained steady at $0.7045 following the release of employment data indicating that the unemployment rate has stabilized at multi-month lows of 4.1%. The New Zealand dollar experienced a significant decline, marking its sharpest percentage drop since the tariff measures implemented last April, following the central bank’s cautious stance on future interest rate increases, which fell short of market expectations.

The kiwi experienced a decline of nearly 1.4% overnight, trading just below $0.60 in the morning session. The euro stood at $1.1788, experiencing a decline following a report that European Central Bank President Christine Lagarde intends to depart prior to the conclusion of her term in October of the following year. Sterling was positioned at $1.3497. The Fed minutes revealed a split among policymakers regarding the direction of U.S. rates, indicating that the incoming chairman, set to begin in May, may face challenges in implementing rate cuts. According to the minutes, several policymakers anticipate that productivity gains will help mitigate inflation; however, “most participants” warned that progress could be slow and inconsistent. Several even indicated that increases are possible if inflation remains above target. “This suggests there isn’t a great deal of urgency to cut rates again, at least not until after current chair (Jerome) Powell’s term ends in May,” stated Peter Dragicevich.

Market participants are anticipating the release of global purchasing managers’ index figures and U.S. gross domestic product data, scheduled for Friday. The yen experienced a decline against the stronger dollar overnight, coinciding with the Trump administration’s announcement of projects worth $36 billion, marking the initial investments under Japan’s commitment to a $550 billion U.S. investment pledge. It experienced a decline of 1% overnight and remained stable at 154.78 against the dollar on Thursday, marking a pullback from the 152 level that was tested last week following Prime Minister Sanae Takaichi’s significant electoral win. The yen has experienced a prolonged decline due to persistently low domestic interest rates and apprehensions regarding Japan’s fiscal outlook.

However, it has recently gained traction amid optimism surrounding economic growth. “Direct Japanese investment into the U.S. will be a key watch factor this year, and one which adds to the very mixed picture on USD/JPY,” said Chris Turner. The inquiry for FX markets this year revolves around whether this investment results in a supportive dollar flow or if Japan’s FX reserves are utilized to secure new USD loans, thereby alleviating pressure on the yen. The latter appears to be the favored result for Tokyo. Holidays in Hong Kong, China, and Taiwan resulted in reduced trading activity across Asia, while the yuan maintained stability at 6.89 against the dollar in offshore markets.