FRANKFURT (MarketWatch) -- The U.S. dollar rebounded from early weakness Wednesday, erasing a loss versus the Japanese yen while the British pound plunged to a 13-month low versus the dollar after minutes of the Bank of England's February policy meeting found a growing minority backed a call for additional quantitative easing.
The British pound (GBPUSD) stole the show changing hands at $1.5302 in recent action versus a level of $1.5427 in North American trade late Tuesday.
Sterling slumped after minutes of the Bank of England's February meeting showed that three members of its nine-person Monetary Policy Council, including Gov. Mervyn King, voted for a 25 billion pound ($38.3 billion) rise in the bank's asset-buying program, the centerpiece of its quantitative-easing strategy, to GBP400 billion. .
Just one member, David Miles, had pushed for a rise in the January meeting. The growing support surprised market participants.
"As February's minutes show, the MPC are becoming more willing to increase QE. Given the fragile nature of UK growth, any major disruption in the global economy this year may lead to an expansion in the program," said Katie Evans, economist at the Center for Economics and Business Research, a London consulting firm.
The ICE dollar index (DXY), a gauge of the greenback's performance against a basket of six major global currencies, was at 80.648 compared with 80.450 in New York Tuesday.
The WSJ dollar index , which measures the greenback's moves against a slightly wider basket of currencies, rose to 72.03, up from a close of 71.86.
The yen initially rose after Japanese Prime Minister Shinzo Abe said the need to create a fund to buy foreign bonds was declining, but later gave up gains.
The U.S. dollar (USDJPY) changed hands at 93.58 yen, compared with around Yen93.42 immediately before Abe's remarks in the Japanese parliament were reported by newswires, and versus Yen93.45 in New York late on Tuesday.
The euro (EURJPY) was little changed at Yen125.12.
The dollar had risen as high as Yen93.73 and the euro had climbed to Yen125.87 earlier in the day, after a Japanese media report had said that Toshiro Muto was no longer being considered for the Bank of Japan governor.
Muto was widely seen as a moderate in his monetary-policy preferences. The report about his likely ouster from the race fueled hopes that a candidate who favors aggressive monetary easing -- which could in turn drag the yen lower -- may now succeed incumbent Masaaki Shirakawa. Shirakawa plans to step down on March 19.
Abe said he would consider candidates for the Bank of Japan governor and two deputy governors on his return from his official trip to the U.S., from Feb. 21 to Feb. 24.
Also aiding the yen's weakness earlier in the day were official data, which showed that Japan's trade deficit for January ballooned to Yen1.63 trillion from Yen641 billion in December.
Meanwhile, the New Zealand dollar, also known as the kiwi, got hammered after Reserve Bank of New Zealand Gov. Graeme Wheeler said the central bank "stands ready to intervene in the currency when circumstances are right."
The kiwi (NZDUSD) slumped to 83.69 U.S. cents from about 84.65 cents in North American trade. The New Zealand currency was trading at about 75 cents in June last year.
`Strong language from a new governor'
"With such strong language from a relatively new governor, Wheeler may find himself with a credibility issue should [ the kiwi] move higher and no action be forthcoming," Michael Turner, a fixed-income and currency strategist at RBC Capital Markets, wrote in a note to clients.
The euro gave up a modest gain against the dollar as markets looked ahead to a busy schedule of events later in the day. The shared currency (EURUSD) fetched $1.3370, compared with $1.3391.
Data on U.S. housing starts, as well as minutes of the Federal Reserve's last meeting, were due Wednesday.
The Australian dollar (AUDUSD) fell to $1.0316 from $1.0358.
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