Fed becomes concerned about strong Dollar

The minutes from the latest FOMC meeting showed that policy makers are concerned about slowing global growth and a stronger Dollar that poses risks to the nation's economy. As a result officials decided to keep interest rates low for a considerable time. Some officials warned that the U.S. economic growth might be slower than expected if foreign economic expansion is weaker than projected. On top of that, policy makers believe that further strengthening of the U.S. Dollar may hurt exports and weigh on inflation, as a strong currency makes imported goods cheaper adding to deflationary pressure that would keep consumer prices below the Fed's 2% goal. The Greenback dropped versus the common currency and pared gains against the Japanese Yen following the minutes release. The Euro gained versus the Dollar to $1.2741 from $1.2657 ahead of the release, while the greenback declined to 108.11 yen from 108.72.  The Dollar has strengthened versus major counterparts in recent months amid expectations that the Fed will hike interest rates soon for the first time in eight years. 

As expected, the Fed will end its market-friendly asset-purchasing scheme, aka quantitative easing, after this month. The programme that flooded markets with easy money in an attempt to support the U.S. economy after the financial crisis has weighed on the U.S. Dollar. The next FOMC meeting will take place on 28-29 October.