Dollar falls as investors see Fed minutes as less hawkish than feared

A picture illustration of U.S. dollar, Swiss Franc, British pound and Euro bank notes, taken in Warsaw January 26, 2011. REUTERS/Kacper Pempel
  • Dollar slips, euro gains
  • U.S. retail sales strong
  • Investors watch developments in Ukraine

NEW YORK, Feb 16 (Reuters) - The U.S. dollar index was down on Wednesday, hitting its lowest level since Friday after minutes from the last U.S. Federal Reserve meeting suggested policymakers are not set on a particular pace of interest rate hikes.

According to the January meeting minutes released on Wednesday, Fed officials last month agreed that, with inflation widening its grip on the economy and employment strong, it was time to tighten monetary policy, but also that decisions would depend on a meeting-by-meeting analysis of data. read more

Strategists said the minutes suggested policymakers may not be as hawkish as investors feared.

"Members were not as aggressive as some had expected, which is being reflected in the modest sell-off of the dollar," said John Doyle, vice president of dealing at Monex USA in Washington.

"We are taking these minutes with a grain of salt anyway, as the meeting happened before the recent CPI and PPI data, which were considerably higher than forecast."

Earlier this week, St. Louis Fed President James Bullard reiterated calls for a faster pace of Fed rate hikes, and stronger-than-expected U.S. economic data including Wednesday's U.S. retail sales data have helped to underscore that view. read more

Those expectations have helped to give support to the dollar in recent sessions.

At the Fed's Jan. 25-26 meeting, policymakers agreed that it would "soon be appropriate" to raise the Fed's benchmark overnight interest rate from its near-zero level.

The dollar index was last down 0.3%, while the euro was up 0.2% at $1.1383 . The U.S. dollar was down 0.4% against the Swiss franc and down 0.2% against the Japanese yen .

On the geopolitical front, the United States and NATO said Russia was still building up troops around Ukraine on Wednesday despite Moscow's insistence it was pulling back.

The Russian defense ministry said its forces were pulling back after exercises in southern and western military districts near Ukraine. The Russian rouble strengthened 0.73% versus the greenback to 75.14 per dollar. read more

Oil prices rallied earlier, and the Canadian dollar rose 0.33% versus the greenback to 1.27 per dollar.

Sterling was last trading at $1.3593, up 0.44% on the day. Data earlier showed UK inflation hit a nearly 30-year high of 5.5%. read more

The Bank of England has already raised interest rates twice since December, and financial markets expect a further rate rise on March 17 after the BoE's next meeting.

In cryptocurrencies, bitcoin was down 0.7% at $44,271.

========================================================

Currency bid prices at 3:28PM (2028 GMT)

Additional reporting by Gertrude Chavez-Dreyfuss and Elizabeth Howcroft; Editing by David Holmes, Barbara Lewis, Christina Fincher and Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.