“Investors are not certainly feeling comfortable in holding any risky assets in risk off trade, and hence we have seen positive sentiment in gold price and seen dollar weakness and expectations that Federal Reserve might not raise rates in September“, Naeem Aslam, Chief Market Analyst at AVA Trade.
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Minutes of their July 28-29 discussions released Wednesday show that officials believed they were close to achieving their goals on employment.
Ads Securities said: “After having raised the possibility of a March hike, then June, then September they [the Fed] have had to face the fact that the numbers are not there, and the rate hike won’t happen next month”.
The Fed’s key interest rate has been kept near zero since December 2008. But some thought policymakers might take a gradual approach in lifting rates after China’s surprise devaluation of its yuan last week. Major indexes had fallen more than 1 per cent in late morning trading but the Nasdaq and Dow industrials briefly turned positive after the release of the Fed minutes. Energy producers and mining companies led declines in the S&P 500, with both industry groups down at least 1.2 per cent. Oil has fallen 30 per cent from this year’s peak amid mounting concern over a global glut in the commodity.
Economic turmoil in the euro zone and China has strengthened the dollar, making imports cheaper for US consumers and keeping inflation below the Fed’s target.
But the road to rate hike remains bumpy.
Traders gearing up for the Federal Reserve to raise interest-rates next month reversed course Wednesday after minutes from the central bank’s July meeting showed policy makers were still waffling on whether the economy is strong enough to warrant higher borrowing costs.
“The Fed is looking less likely to move in September, everybody is really anxious China is slowing down faster than official figures are telling you”, Evan Lucas, at IG Markets, told Bloomberg News.
The mainland’s benchmark Shanghai Composite was 1.5% down to 3,735.92 points.
Prices rose to $1,153.70, the highest for a most-active contract since July 15.
At the same time, “some” officials said economic reports had not yet provided the central bank the “reasonable confidence” it has been seeking that inflation will drift toward the Fed’s annual 2% target over the medium-term.
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The US dollar bought 123.48 Japanese yen, lower than 123.86 yen of the previous session.
