The long-awaited report from the November 1-2 Fed meeting showed that officials were largely satisfied that they could now act in smaller increments.
“I think it is now almost certain that the FOMC will slow the pace of tightening from December onwards,” said Carol Kong, currency strategist at the Commonwealth Bank of Australia (CBA).
The dollar index, which measures the greenback against six key industry peers, was 0.066% lower at 105.830, after falling 1% overnight.
This month, the Fed raised its key interest rate by three-quarters of a percentage point for the fourth consecutive time in an effort to curb stiflingly high inflation.
But slightly cooler-than-expected US consumer price data has fueled hopes of a more moderate pace of increases. Those hopes pushed the dollar index down 5.1% in November, putting it on track for its worst monthly performance in 12 years.
According to Citi strategists, there is still considerable uncertainty about how high interest rates can rise, despite the consensus that interest rates will rise more slowly.
The minutes also show that a debate is emerging within the Fed about the risks a rapid policy tightening could pose to economic growth and financial stability. At the same time, policymakers acknowledged that little demonstrable progress has been made on inflation and that interest rates have yet to rise.
Data from Wednesday showed that US activity contracted for a fifth straight month in November, with a measure of new orders hitting its lowest level in 2.5 years as higher interest rates dampened demand.
However, CBA’s Kong warned that markets are overly optimistic about a possible approaching end to the tightening cycle, noting that there is still strong support for the US dollar due to China’s zero-COVID policy.
Rising cases of the coronavirus have led Chinese cities to impose more restrictions, increasing investor concerns about the economy and reducing risk appetite.
The Australian dollar was up 0.25% against the greenback at $0.675, while the kiwi was up 0.26% at $0.625.
The euro was up 0.23% at $1.0419, while the British pound last traded at $1.2083, up 0.26% on the day. The pound rose 1.4% overnight after preliminary UK economic data beat expectations, albeit still showing a contraction.
The Japanese yen rose 0.54% against the greenback to 138.84 per dollar.
US markets are closed for Thanksgiving on Thursday and liquidity is likely to be thinner than usual.