The yen saw some strength as it was supported by the demand for safe haven assets. Stocks fell modestly on Friday, as oil prices retreated on prospects of higher output from Libya and Nigeria, and inflation data helped the case for Fed tightening.
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“Given that market expectations are already for a path that rises above zero only very slowly over the next few years, there is not too much room to change those beliefs”, Woodford said. The greenback is down 0.7 percent for the week, with the yen finding favor as risk sentiment soured on worries that central banks are running out of ammunition to bolster economic growth.
Stronger-than-expected US inflation “certainly adds to the case for a rate hike in December but once again doesn’t suggest the need for any urgent action by the Fed at this week’s meeting”, James Woods, a strategist at Rivkin Securities in Sydney, wrote in a note to clients. The chances of a rate hike this week are low given a string of weak United States data recently, particularly the ISM data and the retail sales numbers. The aussie received an added boost after housing data out of China, which is Australia’s largest trading partner. The core CPI increased 2.3% in the 12 months through August.
The euro bounced from Friday’s two-week low of $1.1149 and hit a session high of $1.1172.
Janet Yellen says one of the tools the Federal Reserve can use to fight the next recession is a pledge to keep interest rates low for a long time, but the economist who led the intellectual charge to deploy such forward guidance isn’t so sure. OPEC may call an extraordinary meeting if ministers reach consensus at an informal gathering next week, Secretary General Mohammed Barkindo said, according to the Algerian Press Service. There is growing speculation that oil producers, which include Saudi Arabia and Russian Federation, will agree to cap output in an effort to help oil prices rise.
OIL: Benchmark U.S. crude added 79 cents to $43.82 per barrel in NY. Brent crude, used to price worldwide oils, rose 72 cents to $46.50 per barrel.
The day’s economic calendar remains light, with investors awaiting Eurozone current account and construction output data later in the day for further direction.
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The trade-weighted index climbed as high as 79.05 earlier this month and was recently at 78.01, still well above the 76 level the Reserve Bank had projected it would average in the September quarter. Therefore, moves in the currency markets could be very limited today and tomorrow.
