The dollar was last up 0.79 percent against the yen at 102.64 yen, after hitting a session high of 102.74 yen.
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Toward 2100 GMT, the euro was worth US$1.1217, down from US$1.1234 on Monday. The most anticipated had been Federal Reserve Governor Lael Brainard, a noted policy dove whom some investors had thought might signal a change in her stance, which in turn may have signaled a willingness for the FOMC to raise rates as early as next week.
Still, the dollar later received some support from buying to cover short positions, as shares resumed their ascent. Governor Brainard said economic progress continues domestically, but the Fed will continue to keep the policy loose. “This feels more like a relief that a September rate hike is probably off the table, especially after these dovish remarks”. Wells Fargo lost $1.84, or 3.8 percent, to $46.70 and Goldman Sachs dipped $3.95, or 2.3 percent, to $167.11.
The comments came after Boston Fed President Eric Rosengren said on Friday that low interest rates are increasing the chance of overheating the US economy. With futures-implied probability of a rate hike in September close to just 20%, it seems investors are becoming more convinced that inflation risk will not manifest for some time yet.
“Brainard’s speech will be the last scheduled appearance from a Fed policymaker ahead of the pre-meeting blackout period and many market participants see this as a last opportunity to for the Fed to fine-tune expectations ahead of the meeting”, Credit Agricole analysts said in a note.
The comments came after Boston Fed President Eric Rosengren said on Friday that low interest rates are increasing the chance of overheating the US economy.
US crude fell to $45.55 a barrel during mid-morning trade.
The lower chance of a rate hike is typically supportive of the stock markets. News stories displayed here appear in our category for Business and are licensed via a specific agreement between LongIsland.com and The Associated Press, the world’s oldest and largest news organization. Verizon shed 1.12 dollars, or 2.1%, to 51.45 dollars and AT&T fell 74 cents, or 1.8%, to 39.97 dollars.
Traders have expected a 15 percent rate hike in September, according to CME Group’s FedWatch tool. The Australian dollar, Indonesia’s rupiah and Malaysian ringgit each climbed 0.5 percent while the Thai baht gained 0.3 percent and the Singapore dollar put on 0.2 percent.
Meanwhile, the Bank of Japan should stick to a policy that focuses on asset purchases to achieve its 2% inflation target, said an adviser to Prime Minister Abe and influential former member of the bank’s policy board, The Wall Street Journal reported.
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Minneapolis Fed President Neel Kashkari said “politics does not play a part” in the Fed’s deliberations and that current low USA inflation means there is no “huge urgency” to hike.
