By Anora Mahmudova and Sara Sjolin, MarketWatch , Hiroyuki Kachi

Offshore yuan jumps most against the dollar in a year

The dollar tumbled to the lowest level a month against major rivals on Thursday, extending weakness from the prior session after minutes of the Federal Reserve's December meeting pointed to a number of risks that could change the path for interest rates.

Minutes from the latest Federal Reserve meeting showed policy makers were uncertain about the impact of the fiscal stimulus measures proposed by President-elect Donald Trump and expressed some concerns about the strength of the dollar.

The ICE Dollar Index slumped 1.3% to 101.33, the biggest one-day drop since June 2016, as the greenback retreated against most major currencies.

Against the yen, the dollar fell to Yen115.49 from Yen116.64 late Wednesday in New York. The euro rose to $1.0595, from $1.0526 on Wednesday.

The dollar remained weaker after weekly jobless claims and private-sector hiring data. The number of Americans who applied for unemployment benefits after Christmas sank to 235,000, close to a 43-year low. Meanwhile, ADP Inc. said private-sector hiring slowed in December (http://www.marketwatch.com/story/private-sector-adds-153000-jobs-in-december-adp-2017-01-05), adding 153,000 jobs after a revised 215,000 in November. The data is used by economists and investors to get a feel for the Labor Department's employment report, set for release Friday, which covers government jobs in addition to the private sector.

"Recent dollar-buying is taking a breather," said Daiwa Securities senior FX strategist Yukio Ishizuki, suggesting that the Fed comments may be providing traders with a chance to peg back their bullish stance on the dollar ahead of U.S. jobs data later in the week.

While dip-buying may help support the dollar's downside, "I don't think investors will aggressively take new positions" ahead of the jobs data on Friday, Ishizuki added.

The U.S. currency started to come under heavy selling pressure on Wednesday after minutes from the Fed's Dec. 13-14 meeting (http://www.marketwatch.com/story/interest-rate-hikes-might-come-at-faster-pace---fed-minutes-show-2017-01-04) showed central bankers grappling with "considerable uncertainty" about the new U.S. administration's possible impact on the economy.

The officials "pointed to a number of risks that, if realized, might call for a different path of policy than the currently expected," the minutes read. The Fed has penciled in three rate increases in 2017, according to the so-called dot plot of forecasts.

The policy makers' debate about the potentialimpact of Trump's planned fiscal stimulus suggests Fed policy may be tighter than expected in 2017--a view that fits in with a sustained rally in the dollar since Trump's election victory.

But the market appears to have focused on the "considerable uncertainty" comment, driving U.S. bond yields and the U.S. dollar lower overnight, said Rodrigo Catril, currency strategist at National Australia Bank.

The morning's sharp move in the U.S. dollar appears to have been triggered by a drop in U.S. 10-year bond yields , Catril said. A move lower in U.S. yields is driving the U.S. dollar lower across the board, with the yen leading the way, he added.

On Thursday, the yield on the 10-year Treasury note (http://www.marketwatch.com/story/us-government-bond-yields-retreat-after-private-sector-jobs-report-2017-01-05)was down 8 basis points at 2.36%.

In other currencies, China's yuan surged to its highest level against the dollar since mid-November (http://www.marketwatch.com/story/yuan-surges-against-dollar-as-borrowing-rate-jumps-2017-01-05) in offshore markets, forcing a scramble by investors who had bet against it.

The pound was changing hands at $1.2425, up from $1.2341 late Wednesday in New York.

Among emerging market currencies, the Mexican peso strengthened 0.5% after the country's central bank intervened to stem the slide in the currency. The intervention was the first since the election of Donald Trump as U.S. President and aimed to lift the peso from record lows. The dollar bought 21.34 peso on Thursday, down from 21.46 late Wednesday in New York.

(END) Dow Jones Newswires

January 05, 2017 12:00 ET (17:00 GMT)

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