SINGAPORE/TOKYO The dollar inched higher against the yen on Tuesday but remained below the previous day’s high, having taken a hit after dovish comments from a Federal Reserve policymaker reduced bets that the Fed would raise interest rates this month.
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“My main point here is that in the presence of uncertainty and the absence of accelerating inflationary pressures, it would be unwise for policy to foreclose on the possibility of making further gains in the labour market”, Brainard said. Retail sales data on Thursday and consumer inflation data on Friday will next be watched for signs of whether US economic strength can support a rate increase. Hong Kong’s Hang Seng index gained 0.8 percent to 23,482.47 while Australia’s S&P/ASX 200 was up 0.1 percent to 5,222.00. Stock indexes overseas are slipping as investors worry about the possibility of an imminent USA interest rate hike.
Federal Reserve officials have raised the chances of another interest rate rise this year in the past few weeks and the European Central Bank and Bank of Japan have also refrained from further monetary policy easing recently, culminating in Friday’s revaluation of stocks after U.S corporate earnings fell for the fifth straight quarter.
USA interest rate futures prices rose on Monday, diminishing the implied probability of a rate hike by the United States central bank next week, after Federal Reserve Governor Lael Brainard warned against a rush to raise interest rates. The S&P 500 Index added 1.5 percent, the most in two months, after Brainard said she sees no reason to rush to raise rates because right now there seems little need to lean against an overshoot of inflation or employment. Until the recent comments, investors had expected the Fed to delay a rate hike until December or later.
US government debt prices were mostly higher on Monday, as investors digested comments from Federal Reserve Governor Lael Brainard and the results of the Treasury Department’s sale of 10-year and 3-year notes. And inflation remains well below the 2% the Fed is targeting. The Fed’s leaders will meet next week.
PERRI-GOING UP: Irish drug and ingredient maker Perrigo added $7.10, or 8 percent, to $95.81 after the activist investment firm Starboard Value bought a 4.6-percent stake in the company. As David Kelly Chief Global Strategist at J.P. Morgan funds wrote in a note to clients Monday, traders will have to decide “whether more hawkish tone from some Fed officials represents a genuine consideration of raising rates or yet another head fake from a very cautious Fed”. Brent crude, the benchmark for global oil trading, climbed 11 cents to $48.12 a barrel in London.
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U.S. West Texas Intermediate crude rose 41 cents, or almost 1 percent, to settle at $46.29. The UK’s FTSE 100 Index declined 1.1%, France’s CAC 40 index fell 1.2%, while Germany’s DAX index slid 1.3%. Ten-year yields US10YT=RR dipped 1 bps to 1.66 percent.
