She gave no timeframe during her speech at the annual Jackson Hole symposium of global central bankers, but Fed vice chairman Stanley Fischer later said September was a possibility. Payrolls data on Friday could strengthen the case for higher US interest rates, as has been hinted over the past week by Federal Reserve officials.
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Fischer said Friday’s nonfarm payrolls report for August was likely to be vital to the decision over an increase in the near term.
MSCI’s all-country world equity index was last down 0.5 points, or 0.12 per cent, at 417.92.
Christopher Vecchio, currency analyst at DailyFX, said that Yellen’s comments had pushed up the odds of a December 2016 rate hike from 44 percent on Thursday to 65 percent by the time the closing bells rang on Friday.
Against the low-yielding yen, the dollar rose 0.4 percent to 102.35 yen JPY=, just below Monday’s 102.39, its highest since August 9.
American Airlines fell 1.7 per cent after Scott Kirby, its No.2 executive, left the company to join rival United Continental.
The US stock market has recorded a boost following several years of low interest rates, but the now strong likelihood of a hike is making market players uncomfortable, since it is bound to increase the cost of debt for companies. US economic data on Monday showed consumer spending increased for a fourth straight month, pointing to a pickup in growth that could pave the way for the Fed to raise interest rates later this year.
Gold is highly sensitive to rising USA interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the U.S. dollar, in which it is priced.
Moreover, the German bonds have been closely following developments in oil markets due to their impact on inflation expectations.
The Dow Jones industrial average .DJI ended up 107.59 points, or 0.58 percent, at 18,502.99. It has since recovered about 2 percent, but that still leaves it around 12 percent lower than where it was before the June 23 referendum on European Union membership. The 10-year Treasury note declined to 1.592% from 1.631% on Friday.
The Confederation of British Industry said investment plans among services firms, the largest sector of the British economy, were at their lowest in more than four years. Brent crude, used to price oil internationally, lost 66 cents to $49.26 a barrel.
The dollar bought 101.94 Japanese yen, higher than 101.87 yen in the previous session. The euro fell to $1.1196 from $1.1289.
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Also on the Comex, silver futures for September delivery slumped 3.8 cents, or 0.2%, to trade at $18.73 a troy ounce during morning hours in NY.
