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Dollar weakens after strong gains as Fed may tighten policy soon

 The dollar eased slightly on Thursday after touching a 16-month high as the minutes of the US Federal Reserve's previous meeting showed the possibility of a faster pace of bond purchases.

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 96.733, just below Tuesday's high. Wednesday was 96,938, the strongest level since July 2020.

USD/JPY fell 0.1% to 115.35, not far from an overnight high of 115.53, levels not seen since January 2017. GBP/USD rose 0.2% to 1.33485, { {1 | EUR/USD}} rose 0.2% to 1.1218 after falling below 1.12 on Wednesday and AUD/USD gained 0.1% to 0.7204.

Minutes of the Fed meeting held in early November, when the central bank agreed to begin cutting bond purchases, were released on Wednesday. These suggest that some policymakers are open to the idea of ​​accelerating the contraction of bank bond-buying programs if inflation remains high. This could lead to interest rates going higher soon.

At the same time, data showed personal income and personal spending both increased more than forecast, while the PCE Price Index, widely seen as the Fed's preferred inflation gauge, rose at the fastest pace. since April into October and rose to a multi-decade high on an annualized basis.

"We are increasingly finding evidence of renewed inflationary pressures in the United States, increasing our confidence in the direction the Fed will turn in 2022," said analysts at Nordea.

Very little US news is expected to affect forex markets on Thursday due to the Thanksgiving holiday, but the minutes of the European Central Bank meeting at the end of October will be released. .

“Despite the fourth [Covid] wave in Europe, the ECB seems to remain in view that the PEPP [pandemic emergency purchase program] program will end in March,” said analysts at ING. ,” said analysts at ING.

Elsewhere, USD/TRY fell 0.3% to 12.0497, with the Turkish lira recovering somewhat from its drop to record lows earlier in the week as President Tayyip Erdogan defended the cut. The central bank's recent interest rate cut. The rate climbed to a high of 13.45 on Tuesday.

Additionally, USD/SEK fell 0.1% to 9.1039 ahead of the Riksbank meeting, with investors looking to see if the Swedish central bank still plans to keep its policy interest rate at 0 in 2024 or not. That comes after Sweden's Prime Minister was forced to withdraw after her coalition partner refused to pass her budget bill.

USD/HUF fell 0.1% to 328.67, with the National Bank of Hungary expected to raise its one-week deposit rate by 10 basis points to 2.60%.

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