In the past few months, the Fed has been swaying back and forth on whether to raise rates this year, keeping the dollar in check.
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Hawkish comments on Friday by Fed Chair Janet Yellen and Vice Chair Stanley Fischer increased expectations the USA central bank could hike at its September policy meeting, though most investors and economists view a single increase at the December meeting as more likely.
The Australian dollar was trading at US75.60c, down from US76.33c on Friday. That contrasts with New Zealand Reserve Bank governor Graeme Wheeler’s signal that he has another cut to the official cash rate up his sleeve as he tried to revive stubbornly low inflation. United States crude was down 39 cents, or 0.83 per cent, at $46.59 per barrel.
Gold is highly sensitive to rising U.S. interest rates which increase the opportunity cost of holding non-yielding bullion while boosting the dollar in which it is priced.
And after closing lower on Friday, Wall Street stock futures pointed to a flat start yesterday.
Most investors do not expect further policy measures when the ECB’s rate-setting Governing Council meets next week, though Westpac’s Franulovich noted that the recent string of weak data has increased speculation that a further easing could be possible.
The dollar index rose 0.21 percent, continuing to trade at a more than two-week high on higher prospects of a rate increase.
The dollar fell from the day’s highs, however, after the Institute for Supply Management-Chicago said its business barometer fell 4.3 points to 51.5 in August, below expectations.
Palladium was up 0.5 percent at $672.72, after falling to a near six-week low of $665.97.
Wells Fargo WFC.N rose 2.5 percent and provided the biggest boost to the S&P, while JPMorgan JPM.N and Bank of America BAC.N rose about 1.1 percent.
Silver fell 0.6 per cent to $18.84 an ounce.
A strong greenback makes fuel purchases more expensive for countries using other currencies domestically.
USA one-hundred dollar bills are seen in this photo illustration at a bank in Seoul August 2, 2013.
West Texas Intermediate closed with losses of 1.03% at $46.49 and Brent crude down 1.7% to $48.43. “We can choose the pace, but we choose the pace on the basis of data that’s coming in”.
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Gold is headed for the first monthly decline since May as investors price in the prospect of higher USA borrowing costs by the end of the year and slowing purchases of bullion-backed exchange-traded funds.
