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Dollar drops vs. yen after Federal Reserve minutes fail to ease market worries

Dollar drops vs. yen after Federal Reserve minutes fail to ease market worries

The dollar dropped further against the yen Tuesday as risk aversion crept back into markets after minutes from the U.S. Federal Reserve's last meeting failed to calm investors.
The U.S. currency dropped to 114.56 yen from 116.13 late Monday as traders shied away from risky yen carry trades, which involve selling off the low-yielding yen in favor of better returns on the dollar.
Markets had hoped that minutes from the Fed's Aug. 7 meeting would show policy makers leaning toward an interest rate cut to alleviate volatile market conditions. In the minutes released Tuesday, however, the central bank acknowledged recent market turmoil but didn't discuss a cut in its target federal funds rate, or interest that banks charge each other to borrow money.
The Fed later cut the discount rate, the interest it charges banks to borrow money.
Lower interest rates can weaken a currency by giving investors lower returns on investments denominated in it.
Traders now set their sights on Friday, when Fed Chairman Ben Bernanke will speak in Jackson Hole, Wyo.
Economic data released Tuesday also failed to ease concerns about tightening credit. The New York-based Conference Board reported that its Consumer Confidence Index fell to 105.0 from a revised reading of 111.9 in July as volatile financial markets and housing problems took a toll.
Also, Standard & Poor's housing index showed U.S. home prices in the second quarter suffering the sharpest decline in 20 years.
The dollar rose against the euro after a report showed business confidence continued to slip in Europe's largest economy.
The 13-nation currency drifted down to $1.3634 from $1.3653 in New York late Monday after Germany's Ifo institute reported its business confidence index fell to 105.8 points in August from 106.4 in July, the third successive monthly decline.
That was still a better performance than economists predicted.
The British pound dropped to $2.0072 from $2.0129 late Monday. In other New York trading, the dollar bought 1.1996 Swiss francs, down from 1.2031, and 1.0628 Canadian dollars, up from 1.0530.


Updated : 2021-06-21 02:14 GMT+08:00