The greenback edged up higher against the majors in early US trading, firming to 1.4017 versus the euro and 117.48 against the yen before easing in the afternoon ahead of the FOMC monetary policy minutes. The currency market remains quiet as traders returned to their desks following the holiday to a dearth of fresh economic news.

The dollar continues to benefit from last week’s stronger than expected jobs data, which tempered expectations for further aggressive rate cuts from the FOMC. Nonetheless, we still expect the Fed to cut rates by 25-basis points at the end of October.

The minutes of the FOMC meeting revealed a unanimous decision to cut rates by 50-basis points to 4.75% due to the extremely weak conditions of the housing market, tighter financial conditions and their potential impact on the economy. Members expressed concern that a weaker economy would further exacerbate tightening credit conditions and reinforce the slowdown. Although members remained concerned about the upside inflation risks, the Fed is more confident a decline in inflation would be sustained. Also, the Fed sees further slowing of employment likely but labor markets should remain fairly tight.

This article contains the following sections:

You need to be logged in to Forexnews to view the remainder of this article. Please login with your username and password at the top left corner of the site, or Request Free username and password to receive full access.