As weak USA service sector data darken the economic outlook and elevated uncertainties over whether the Fed will increase interest rates this year, the dollar decline compared to the other major currencies this Wednesday. Wall Street was set for a lukewarm start after the holiday.
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Brazil’s real surged the most since June as investors took advantage of the country’s relatively higher interest rates.
European stocks were mixed in early trading with Britain’s FTSE 100 down 0.2 percent to 6,866.16. The Stoxx 600 index edged up 0.1 percent towards eight-month highs hit on Monday, led by a rise of nearly 1 percent in oil and gas shares.
ENERGY: Oil prices pushed ahead amid speculation of a production freeze after the world’s two largest oil producers, Russian Federation and Saudi Arabia, agreed to act together to stabilize global oil output.
Banks, for whom rock-bottom interest rates promise tough times, initially fell before turning slightly positive.
“Since the Jackson Hole speech, the implied probability of Fed’s rate hike for its September meeting fell from 42 percent to 24 percent and the 2-year Treasury yield dipped by around 10 basis points”, said Petr Krpata, currency strategist at ING. The ECB meets on Thursday.
As the Fed Reserve has repeatedly emphasized the correlation between the United States job market and the path of interest rates, this underwhelming Non-Farm Payrolls (NFP) report destabilized expectations of a Fed rate hike happening in the near future.
In Asia, MSCI (Frankfurt: 3HM.F – news) ‘s main Asia-Pacific stock index, excluding Japan was up 0.2 percent, having earlier touched its highest since July past year.
MSCI’s all-world index reached a new apex for 2016 on Monday, capping off an 18% rebound from February’s nadir.
“I don’t think most people are uncertain that the Fed is going to hike, that is pretty well established”, Eliasson said.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4 percent, extending its chunky gains of 2.7 percent over the last two days, to claim a level last seen in July a year ago.
However, Tokyo sank 0.7 percent by the break as the yen extended gains against the dollar following the US PMI reading.
Raising U.S. interest rates makes sense now that the economy is at full employment and “within sight” of the central bank’s 2-per-cent inflation goal, a top Federal Reserve official said on Tuesday.
US bond yields fell across maturities and the greenback dropped against most of its major peers as traders pared bets on a September Fed hike to 24 percent, according to futures data compiled by Bloomberg. The Nasdaq composite gained 22.69 points, or 0.4 percent, to 5,249.90. It was last down 0.2 percent at $0.7668 after GDP data largely met expectations, with Australia’s annual growth clocking its fastest pace in four years last quarter, clinching a remarkable run of 25 years without recession.
“The dollar was apparently hit by massive selling by a US investment trust fund manager”, an official at a currency brokerage house said. Brent crude, the benchmark for worldwide oil prices, lost 18 cents to $47.45 a barrel.
The British pound rose 1 percent against the dollar, touching a fresh seven-week high at $1.3443.
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The reduced expectations of a Fed hike also lifted other commodities.
