* Minutes from FOMC meeting suggest Fed tapering on track
* BOJ governor Kuroda's comments drive yen to highs; dollar
* Euro pegged back ahead of European election
* Sterling index at 5-1/2-yr high after BoE minutes, UK data
(Recasts, adds quote, Fed minutes, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, May 21 The dollar rose against the
euro and yen on Wednesday as the latest Federal Reserve meeting
minutes suggested the U.S. central bank will keep reducing its
stimulus plan, while markets expected the European Central Bank
to further ease monetary policy in the euro zone.
The greenback's advance versus the yen was the first in six
sessions, while it gained against the euro for a second straight
The Fed minutes suggested that the U.S. central bank's
reduction of its stimulus program remained intact, despite
comments from some Fed participants that it's too early to
confirm whether or not the U.S. economy is moving to sustained
"The baseline scenario is still for slow, but steady
improvement in the economy, there is no inflation risk, and the
Fed will keep tapering," said Richard Franulovich, senior
currency strategist at Westpac Securities in New York.
He cited the rise in the dollar against the yen following
the minutes, despite what Franulovich perceived to be dovish
remarks from the Fed minutes. He said the run-up in dollar/yen
may have something to do with the gain in U.S. 10-year yields,
which has a strong positive correlation with this particular
currency pair, following the release of the Fed comments.
"Regardless of what caused the rise in dollar/yen, there's
not enough information in the minutes to sustain it at 101.60
In late trading, the dollar rose 0.1 percent against the yen
to 101.45. It earlier tumbled to its lowest in more than
three months at 100.80 yen, hurt by optimistic comments about
the economy from Bank of Japan Governor Haruhiko Kuroda who gave
no hint of further monetary easing in the near term.
Kuroda said the massive asset purchase program launched last
year was still working and having its desired effect.
In the options market, one-month dollar/yen implied
volatility - or the expected price swing - rose to its
highest in three weeks, highlighting expectations that the pair
is likely to see a new trading range in coming weeks.
The euro, meanwhile, fell to a 3-1/2-month low against the
dollar at $1.3636 and was last $1.3676, down 0.2 percent.
"Expectations about additional easing measures in June have
increased since the ECB's last meeting," said John Doyle,
director of markets at Tempus Consulting in Washington. "And the
European elections are also a factor in the euro's weakness."
Votes for anti-austerity, euro-sceptic parties look set to
increase at the European Parliamentary elections later this
The biggest volumes in the FX market were seen in the pound,
which rose to a 5-1/2 year high against a basket of currencies
, after a surge in retail sales last month and signs some
Bank of England policymakers were leaning towards a rate hike.