NEW YORK (Dow Jones)--The dollar gained broadly Wednesday after the Federal Reserve painted a slightly rosier picture of the U.S. economy. The dollar also was bolstered by a day of positive economic data, leading investors to place bets the Fed could increase key interest rates sooner than previously thought.
The Federal Open Market Committee on Wednesday released minutes from its late January meeting that expressed confidence a U.S. economic recovery was gaining traction and noted debate among members on the details of eventually bringing monetary policy back to normal.
"Overall, the Fed minutes were in line with further signs of stabilization and could be seen as a signal that broader monetary policy normalization may come sooner than expected," said Omer Esiner, senior market analyst at Travelex Global Business Payments in Washington.
The minutes noted China's recent fiscal tightening could have helped boost the dollar.
When China, which has a voracious appetite for commodities that feed its massive expansion, puts the brakes on economic growth, its policies reverberate to emerging markets, as well as to commodity-linked currencies, such as the Australian dollar, said Nick Bennenbroek, head of currency strategy at Wells Fargo in New York.
"When you get indications of the removal of liquidity by major central banks, it tends to damp markets," sending equity and commodity prices down, and leading investors to turn to the dollar, he said.
Earlier, the dollar gained after data showed U.S. housing starts in January climbed to the strongest level since July 2009, while industrial production beat analysts' estimates.
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