“The Fed, at least in speeches this week, have been trying to get markets more in line with what they expect from monetary tightening this year”, said??Richard Falkenhall, a strategist at SEB AB in Stockholm.
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New York Fed President William Dudley on Thursday lauded recent strong gains in U.S. employment after saying Tuesday the Fed could raise rates as soon as next month.
The dollar extended gains against the yen and euro on Monday as U.S. Federal Reserve policymakers took an upbeat tone on the economy and expressed support for a near-term U.S. interest rate hike.
Yields rose after San Francisco Fed President John Williams said late Thursday that next month’s policy meeting is “in play” for an interest-rate hike, and that traders’ views on the path of rates may not be consistent with the Fed’s. Investors await further guidance from Fed Chair Janet Yellen, who will speak August 26 at a meeting of global policy makers in Jackson Hole, Wyoming. Prices for interest rate future contracts show investors see roughly 50/50 odds of an increase at the Fed’s last meeting of the year in December. “Not only that, the behavior of employment has been remarkably resilient”.
The Dow Jones industrial average fell 45.13 points, or 0.24 percent, to 18,552.57, the S&P 500 lost 3.15 points, or 0.14 percent, to 2,183.87 and the Nasdaq Composite dropped 1.77 points, or 0.03 percent, to 5,238.38.
The US benchmark S&P 500 stock index is up 7 per cent this year.
“The dollar had taken a pretty big tumble in the first part of this week, so people had gotten short the dollar and now they’re just buying back”, said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in NY. Trading volumes were thin amid a summer lull in the United States and Europe. Thursday’s, Aug, 18, session was the quietest across Europe’s stock exchanges in almost three months, according to Thomson Reuters data.
In Tokyo, the dollar ticked up to 100.32 yen from 99.94 yen Thursday in NY, but it remains well off levels above 102 yen last week.
The dollar firmed against six major world rivals on the revived Fed rate-hike expectations.
The Australian dollar slipped 0.4 percent to $0.7595 AUD=D4, having touched a 2-week low of $0.7584.
U.S. Treasury debt prices fell as traders locked in recent gains ahead of next week’s government debt supply and the Jackson Hole meeting.
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New York Fed President William Dudley said strong employment and a long-awaited return of middle-wage jobs suggest the labor market is tightening and the broader US economy is on track, and earlier this week, he said it was “possible” for the central bank to hike rates at the September 20-21 meeting.
