Dollar Suffers Broadly As Oil Hits $133, Fed Minutes Offer Bleak Outlook

The dollar remained in retreat versus a basket of major currencies on Wednesday as US stocks slumped and oil prices surged above $133, fueling inflation fears.

The minutes of the April FOMC meeting revealed Wednesday afternoon that the Federal Reserve saw weak economic times ahead including higher unemployment and higher inflation in part from surging commodity prices, but it suggested it remain on hold even in the face of negative growth.

The greenback plunged to a new monthly low against the euro, moving closer to its record trough from earlier this year. The dollar dropped to 1.5776 by 3 pm ET, down more than a penny from its early levels. The buck has been on the defensive against the euro this week amid speculation the interest rate gap between the US and euro zone will not narrow in the near future.

Germany's business climate index unexpectedly climbed to 103.5 in May from 102.4 in April, the Munich-based IFO research institute revealed Wednesday. Economists had expected the index to drop to 102 in the month of May.

The dollar stayed near a 2-week low from the previous session against the sterling, giving back its early gains to close near 1.97. The minutes of the Bank of England's May rate-setting session showed that the Monetary Policy Committee voted 8-1 to maintain the bank rate at 5%. The session was held on May 7 and 8.

The minutes said most members were of the view that a rate cut in May would make it more difficult to keep inflation expectations in line with target.

The dollar continued to backtrack versus the yen, slipping to a week and a half low of 103. Against its Canadian counterpart, the dollar plunged to a 2-month low of .9817, hurt especially by soaring oil prices. The greenback also came under heavy pressure versus the Swiss franc, dropping to a monthly low of 1.0262.