The odds of a hike in September rose to 33 per cent following the comments, from 21 per cent on Thursday, according to CME Group’s FedWatch tool.
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Turning to European markets, Germany’s DAX and France’s CAC-40 were down 0.6 percent and 0.8 percent respectively, while the dollar strengthened 0.3 percent to $1.1167 against the euro.
The US currency gave up gains soon after Yellen spoke as she gave no indication that a rate hike was imminent, but rebounded as traders reassessed her words, and after Fischer spoke.
The dollar extended Friday’s gains and reached a roughly three-week high against the yen of 102.39 yen (JPY=). The S&P 500 (.SPX) was up 13.43 points, or 0.62 percent, at 2,182.47.
Gold has rebounded from a near-five-week low as the United States dollar dropped, shrugging off earlier pressure by top Federal Reserve officials’ comments fuelling speculation that United States interest rates would rise sooner rather than later.
New Zealand’s two-year swap rate rose 3 basis points to 1.96 percent and 10-year swaps rose 5 basis points to 2.41 percent.
Earlier, Japan’s Nikkei bucked the trend in Asia, closing 2.3 per cent higher, the biggest one-day gain in three weeks, as the yen weakened against the resurgent dollar.
We can expect the dollar to continue trading higher against other major currencies for quite some time, more so now since Yellen had confirmed of a strengthened case for USA rate hikes, improvement in the labor market and higher chances for a solid economic growth.
The U.S. dollar index jumped to a hit a session high of 95.69 on Monday after Yellen’s hawkish comments regarding interest rate review pathway. “While the rate hike has not yet happened, markets have already begun to move and shift with the assumption of a hike”. From here, sideway trading seems likely in the days ahead and only a clear break out of the expected 99.90/101.30 range would indicate the start of a sustained directional move’.
The US August jobs report headlines this week’s economic calendar and will be released this coming Friday with the market expecting a non-farm employment change of 186,000. She described consumer spending as “solid” but noted that business investment was weak and exports hurt by a strong dollar.
“As long as the dollar remains below the assumed level, the stock market can hardly stage a full-fledged rally”, he added.
West Texas Intermediate slid 1.7 percent to 46.85 and Brent shed 1.4 percent to 49.21. Gold edged up $1.20 to $1,327.10 an ounce, silver gained 11 cents to $18.86 an ounce and copper edged down less than a penny to $2.08 a pound.
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Yutaka Miura, senior technical analyst at Mizuho Securities Co., said the hawkish comments from Yellen and Fischer make a series of US data to be released this week even more important, especially the jobs data for August.
