Dollar holds key to whether Fed has scope to raise rates in June

NEW YORK (May 19): As soon as the Federal Reserve released meeting minutes describing a weaker dollar, the currency surged to a seven-week high.

That’s the dilemma facing US central bankers, who are weighing economic data to determine when next to raise interest rates. The Fed’s signals of a potential June move may backfire if the resurgent greenback undermines growth and weighs on stocks and oil prices, ultimately eroding the case to boost borrowing costs.

The dollar’s surge since mid-2014 hurt the outlook for growth and inflation, and contributed to the Fed delaying to December its liftoff from near zero, according to strategists. Officials from Janet Yellen to Stanley Fischer have warned that the dollar’s appreciation will limit the pace of tightening.

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