That in turn supported Wall Street shares, with S&P 500 index .SPX rising 0.9 percent to 1,995.31, its highest close in nearly a month, having pared just about a half of its fall from July to late August. In the end, the effect which tonight’s announcement has on the currency markets may come down to the wording of the Fed statement which accompanies its decision. Traders bought back the dollar versus the euro in early Asian trading, following Thursday’s decline in the US currency, on prospects the Fed’s policy stance will benefit the greenback over time as the European Central Bank and Bank of Japan remain open to easing further. “Communicating the future path of interest rates is very important and the Fed would be careful not to signal any excessive tightening given global markets are still very vulnerable”.
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Tom Porcelli, chief U.S. economist at RBC Capital, said the Fed will always face some hurdles to raising rates, but that failure to do so means it is letting other economies lead the way. Speizer said the local dollar rebounded this afternoon on what looked to be a large kiwi buy order, “some kind of financial insto-type order”.
The key event for markets on Friday will be testimony by Reserve Bank of Australia governor Glenn Stevens to the House of Representatives Economics Committee, at Parliament House in Canberra. However, with a small population and a wealth of raw materials to export to the rest of the world, the Aussie remains susceptible to a bout of selling pressure if the Fed raises interest rates tonight.
The pan-European FTSEurofirst 300 index was little changed at 1,428.27, while the Iseq was ahead by 0.4 per cent.
The dollar has weakened 0.7 percent in the past week, the biggest loser among 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. However, the company’s shares are down more than 1 percent.
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The dollar dropped to two-week lows versus the Swiss franc, and it last traded at 0.9598, down 1.2 percent. “This should include upward revisions to GDP projections but a lower profile for interest rates“, Callow said in a note to clients on Thursday. U.S. October crude fell 25 cents to settle at $46.90 a barrel.
