By Samuel Indyk

LONDON (Reuters) – The U.S. dollar edged back towards a one-month low on Thursday, as minutes from the Federal Reserve’s May meeting contained few surprises, with most participants favouring additional 50 basis point rate hikes at the June and July meetings.

The dollar index, which measures the currency against six major peers, was down 0.2% at 101.83 as the minutes showed the Fed is likely to stay the course for now, but keep its options open for a range of policy choices after July.

The index has mostly been consolidating around 102 after a short-lived bounce immediately following Wednesday’s release of the minutes.

Analysts noted that expedited tightening would allow some wiggle room if the Fed wanted to slow the tightening cycle in the second half of the year.

“That base case makes sense from where we’re at now, a couple of 50 basis point rate hikes, and then see where we’re at,” said Giles Coghlan, Director at GCFX.

The dollar index reached a nearly two-decade peak above 105 mid-month, but signs that aggressive Fed action may already be slowing economic growth have prompted traders to scale back tightening bets, with Treasury yields also dropping from multi-year highs.

The implied yield on the eurodollar futures June 2023 contract — essentially where markets see interest rates to be at that point — is down some 80 basis points this month.

ING believes there is room for this to reverse, with the Fed believing the economy is strong enough to withstand rapid tightening.

“Fed speak and the U.S. data calendar suggests those higher levels for the Fed terminal rate could easily be put back into the market – which is dollar supportive,” ING analysts said in an emailed note.

The 10-year U.S. Treasury yield was last down 1.4 basis points at 2.7308%, after earlier dropping to its lowest level since April 14.

China’s yuan weakened past a key threshold to a near one-week low against the dollar as investors were disappointed that a rare high-profile meeting featuring Premier Li Keqiang to support the economy failed to yield any fresh policy measures.

The offshore yuan dropped more than half a percent to 6.75 yuan per dollar. [CNY/]

The euro rose 0.35% to $1.0716, while the dollar fell 0.4% to 126.76 yen.

Risk-sensitive currencies, such as the Aussie, kiwi and loonie were all trading broadly flat against the dollar.

Sterling rose to a three-week high of $1.26165 ahead of an expected announcement from British Chancellor Rishi Sunak on a package of measures to help consumers cope with rising energy bills.

Meanwhile, bitcoin was last trading 1.1% lower at $29,166. Smaller rival ether was lower by over 5%.

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(Reporting by Samuel Indyk, additional reporting by Kevin Buckland; Editing by Emelia Sithole-Matarise, Kirsten Donovan)