The dollar edged higher against the other major currencies on Tuesday, even as comments by a Federal Reserve official on Monday sparked fresh uncertainty over the timing of future USA rate hikes.
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USA stocks plunged about 2.5 percent Friday, their biggest loss in two months, after Federal Reserve Bank of Boston President Eric Rosengren said there’s a case to be made the US central bank should raise rates sooner rather than later.
Strategists at USA investment bank Citigroup (NYSE: C – news) said that Italian stocks could be worth a buy, based on expectations that Prime Minister Matteo Renzi would emerge from a forthcoming referendum in a stronger position, provided that investors chose carefully.
“This asymmetry in risk management in today’s new normal counsels prudence in the removal of policy accommodation”, she said, adding that this approach has served the usa economy well in recent months. “She will not be pushing for a hike in next week’s FOMC meeting”, said Jay Morelock, an economist at FTN Financial, in a note.
The dollar index, which measures the greenback against a group of six major currencies, hit a one-week high of 95.672 as U.S. Treasury yields surged on what analysts said were growing expectations for a December Fed rate increase. The BOJ is scheduled to meet on the same dates as the U.S. Fed, on September 20-21.
WALL STREET: The Dow Jones industrial average gave up 1.4 percent to 18,066.75. The S&P 500 was down 17.39 points, or 0.81 percent, to 2,141.65. The European Central Bank left policy unchanged last week and President Mario Draghi played down the prospect of further stimulus.
ANALYST’S COMMENT: “She highlighted global challenges such as muted inflation and global uncertainties and particular concerns for the US economy”, said Bernard Aw, a market strategist at IG in Singapore.
Brainard’s words, the last from a Fed official before the US central bank’s September policy meeting, followed three volatile trading days in which bond yields soared and stocks racked up heavy losses, chiefly on concern the era of supercharged monetary stimulus could be coming to an end.
The lower chance of a rate hike is typically supportive of the stock markets. Rosengren and Brainard have both been reluctant to raise rates too quickly.
Speaking at the Chicago Council on Global Affairs on Monday, September 12, Governor Lael Brainard called for “prudence” in raising interest rates.
US crude fell 98 cents, or 2.1 percent, to $45.31 a barrel in NY.
-Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.47 percent to 935.49 tonnes on Tuesday.
“With the Fed entering its blackout period, the incoming US data is going to garner even more attention than usual, especially the CPI on Friday”, said Fawad Razaqzada, technical analyst at Forex.com.
Crude oil prices dipped as investors sold into the previous day’s gains and on concerns over increased drilling in the United States.
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US stock prices rose following Brainard’s comments while the dollar weakened and yields on USA government debt fell.
