In the currency market, the dollar came off its intraday lows but still sank against the euro. Late Wednesday, the euro was trading at $1.5548 vs. $1.5452 on Tuesday.

The buck rallied a bit from the beating it took in the face of rising oil, but any gains were capped by a dilution of sentiment regarding the possibility of the Fed raising interest rates sometime soon.

Fed Vice-Chair Donald Kohn fanned that particular flame by saying yesterday that, “It may be efficient to allow some adjustment period in which both overall inflation exceeds its desired low level and the unemployment rate is higher than its long-run sustainable level…”

The goal, Kohn said, would be “setting policy in a manner that balances the undesirable effects of a shock to the system on both inflation and employment, [which should] be more efficient than setting policy so as to deliver more extreme outcomes in either inflation or unemployment.”

However, Kohn also echoed Chairman Bernanke’s recent comments on perception as a self-fulfilling prophecy, by adding that, “Any tendency for these longer-term inflation expectations to drift higher or even to fail to reverse over time would have troublesome implications for the outlook for inflation.”

Source: Buck Tanks on Rising Crude