Fed signals June rate hike likely

The dollar index against a basket of major currencies. was down 0.3 percent at 96.972.

Minutes released on Wednesday from a May 2-3 meeting showed members of the Federal Open Market Committee, which sets the benchmark U.S. lending rate, believed the time would "soon" be right to raise rates.

Federal Reserve policymakers agreed they should hold off on raising interest rates until it was clear a recent USA economic slowdown was temporary, though most said a hike was coming soon, minutes from their last policy meeting showed on Wednesday.

After U.S. Federal Reserve showed concern in raising interest rates, World stocks hit record high and the dollar dipped while oil rose after top producers agreed to extend output cuts for up to a year.

"Members generally judged that it would be prudent to await additional evidence indicating that a recent slowdown in the pace of economic activity had been transitory before taking another step in removing accommodation", according to the minutes.

"The big news obviously today was the release of the Fed minutes and the market basically liked what the Fed and its head Janet Yellen said", said Bill Lynch of Hinsdale Associates.

ANALYST TAKE: "While a 9-month extension to production cuts is widely anticipated, comments from delegates are expected to move prices significantly and remain a driver throughout the day", said Henry Croft, research analyst at Accendo Markets.

Under the plan, a limit would be set on the amount of securities allowed to fall off the balance sheet every month.

Markets are pricing a high probability of over 90 percent of a June rate rise, according to Fed funds futures on Bloomberg, but are less convinced of a further rise in the second half of the year.

The U.S. dollar has been on something of a tear-against one currency where it ought to be quite stable. Tighter monetary policy is seen as the Fed's vote of confidence in the health of the economy. The benchmark 10-year yield was down 1.6 basis point on Thursday at 2.25 per cent.

Despite signs of economic recovery, many in markets worry that a precipitate withdrawal of stimulus could cause turbulence.

Asian stocks show significant strength in Thursday's market, Japan's Topix marched by 0.3% on earlier trading, while Australia's S&P/ASX 200 also inches higher by 0.3%.

Fed officials say the economy also is expected to see a boost from overseas demand for USA exports, as "the risks stemming from global economic and financial developments" have "receded further", the minutes said. The euro edged up to $1.1229 from $1.1119. The Fed bought trillions of dollars in debt during the housing and financial crisis and the recession that followed to help the economy recover.

  • Zachary Reyes