* Fed wants gradual reduction of stimulus
* Fed upgrades U.S. outlook
* U.S. dollar helped by strong private sector jobs data
By Curtis Skinner
NEW YORK, Jan 8 The dollar held gains against
the euro and yen on Wednesday following minutes from the Federal
Reserve's December meeting, which showed the U.S. central bank
was on track to wind down its bond purchases at a steady pace.
The Fed minutes laid out the central bank's rationale for
cutting purchases of Treasuries and mortgage-backed securities
to $75 billion a month from $85 billion starting this month.
Those purchases have helped lower interest rates. As the
economic outlook has improved, the expectation is for reduced
stimulus. Better hopes for U.S. growth have driven investors to
the dollar, which reached a six-week high against a basket of
six major currencies.
The dollar index was last up 0.4 percent on the day
"On balance, the fact that the minutes do not meaningfully
alter the outlook for a gradual and steady reduction in Fed
stimulus remains positive for the dollar," said Omer Esiner,
chief market analyst at Commonwealth Foreign Exchange in
"Indeed, as the tone of economic data improves, there is a
risk that the Fed could become more aggressive in its reduction
of monetary stimulus."
Many members of the policy-setting Federal Open Market
Committee wanted to proceed with caution in trimming the asset
purchases, and most wanted to stress that further reductions
were not on a preset course.
According to CME FedWatch, the contracts show rates markets
now assign roughly a 60 percent probability for the first Fed
rate hike occurring as early as the April 2015 meeting of the
Federal Open Market Committee.
Three weeks ago, when the Fed announced plans to scale back
its massive bond-buying stimulus but pledged to keep interest
rates low for the foreseeable future, rate futures signalled
expectations for the Fed to hold off on its first rate hike
until July 2015 at the earliest.
Still, the market showed minimal reaction as traders had
already priced in the Fed's reduction in stimulus.
The dollar last traded 0.3 percent higher at 104.85 yen
, below an earlier high of 105.12 yen but above Monday's
two-week low of 103.88. Last week, the dollar reached a
five-year peak of 105.44 yen.
The euro, meanwhile, was down 0.3 percent versus the dollar
at $1.3568. Against the pound, the euro hit a one-year
low, with the euro buying 0.8252 pound late on Wednesday.
"Overall, I think this was in line with the markets
expectation," said Brian Dangerfield, currency strategist at RBS
Securities in Stamford, Connecticut.
"The dollar reaction has been fairly muted to this, and I
think that's because for the most part, the information that
we've received is not significantly different from what the
chairman has been saying over the past few weeks."
Earlier in the session, a report by a payrolls processor
showed U.S. private employers added 238,000 jobs in December,
more than expected and the best reading in 13 months. ADP's
National Employment Report also revised November's job gains
The ADP report comes two days ahead of the government's
non-farm payroll report, a measure of the labor market that is
more comprehensive and includes both public and private sector