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There had been much speculation among traders that the speech by
Brainard, announced at the last minute before the U.S. central
bank's pre-meeting blackout period, could see one of its most
convinced policy doves flip to support monetary tightening.
In the event, she instead warned against the Fed removing
support for the economy too quickly, knocking the greenback half
a cent lower.
The effect had faded by the start of European trade and the
dollar traded 0.3 percent higher against the yen and 0.2 percent
against a basket of currencies.
"We've had so much information and misinformation (on the
chances of a rate rise) that the market is just in wait-and-see
mode," said Neil Mellor, a strategist for Bank of New York
Mellon in London.
"We've had a number of supportive comments from the policy
hawks, but they are still struggling to convince the market. The
dollar is right in the middle of the recent ranges."
At 1100 GMT, the euro was trading flat at $1.1236 <EUR=EBS>
while the dollar fetched 102.19 yen. <JPY=>
Sterling <GBP=> was the biggest mover in morning trade in
Europe, down over half a percent against both the euro and the
dollar after lower than expected inflation numbers which pointed
to the economy's weakness rather than a bump due to the
currency's weakness since June's vote to leave the European
Union.
The Aussie dollar <AUD=>, surprisingly strong through a period
when expectations for easier monetary policy there have grown,
was also down 0.4 percent. Other commodities-linked currencies
including the Canadian and New Zealand dollars were also lower
as oil prices fell around 2 percent.
Manuel Oliveri, a strategist at Credit Agricole in London, said
all of those moves look tied up with a wobble in global markets
related to concerns about overpricing of government bonds and
the ability of central banks forever to pump more money into the
financial system.
"Risk sentiment is a bit more stable today but generally there
is this doubt," he said.
"U.S. stocks futures are down in contrast to European markets.
That is on the back of rising uncertainties about central banks'
ability to stimulate their economies and of course the
speculation that the Fed is getting closer to a rise in rates."
Futures pricing for a rise in September was down below 20
percent ahead of the Brainard speech, and it dipped to around 15
percent afterwards.
"We can stick with our main scenario that the Fed won't raise
rates in September," said Koichi Yoshikawa, executive director
of finance at Standard Chartered Bank's Tokyo branch.
"All the talk about a possible rate hike in September turned out
to be noise."
(Additional reporting by Hideyuki Sano and Masayuki Kitano;
editing by Ralph Boulton)
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