The dollar rose to seven-year highs against the Japanese yen on Wednesday after the Federal Reserve meeting released minutes contained no big surprises to make investors change their bets that the U.S. economy will keep strengthening.
Fed policy makers wrestled with whether to nod to financial market volatility and a weakening global economy in their statement last month, but opted not to.
Diverging economic outlooks for the United States, Europe and Japan make it likely that the Fed will begin raising rates next year while the Japanese and European central banks maintain stimulus to try to facilitate growth in their regions.
That should continue to boost the dollar, which has gained against both currencies in recent months.
“The market is still bullish on the dollar and is looking for dips to buy,” said Greg Anderson, global head of FX strategy for BMO Capital Markets in New York. “The minutes themselves are pretty neutral, it shouldn’t change anyone’s mind.”
After very briefly weakening on the release of the minutes the dollar gained back to fresh seven-year highs against the yen.
The Japanese currency has been hurt by Prime Minister Shinzo Abe’s postponement on Tuesday of an unpopular sales tax rise, a day after data showed the economy had slipped back into recession.
On Wednesday, the Bank of Japan voted to continue its massive stimulus efforts by purchasing more government bonds and risky assets to increase base money at an annual pace of 80 trillion yen ($683 billion) in a widely expected move.
“The big message seems to be that prime minister Abe is firmly in control of all policy levers,” said Steven Englander, global head of G10 foreign exchange strategy at CitiFX in New York.
The dollar rose to 118 yen. The euro was little changed at $1.2539.
Solid housing data on Wednesday was also supportive of the dollar.
U.S. housing permits rose to near a 6-1/2-year high in October even as housing starts unexpectedly fell.
“If we’re beginning to see an upward move in housing it really gives legs to the U.S. recovery and to the dollar,” Englander said.