The dollar index dropped 0.5 percent on Thursday, and was on track to mark the second straight day of losses after the central bank’s decision. “A rate hike is probable in December, but it has once again become clear that rates will go up only very gradually”, said Philippe Gijsels, head of research at BNP Paribas Fortis. Oil and commodities firms gained the most as oil and metal prices rose, while a weakened dollar made the climbing easy for the euro, pound and Swiss franc.
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The yen stepped back to 100.78 to the dollar from four-week high of 100.10 touched on Thursday after Japan’s top currency diplomat warned Tokyo will take action if needed.
Goldman Sachs said its U.S. economics team assigns a cumulative 65% probability to a rate hike by the 14 December FOMC meeting, which is roughly the same as implied by fed fund futures. Chances are now at 52%, according to CME Group fed funds futures, up from 48% before the announcement on Wednesday. Now it is down to just three.
Oil prices showed no sign of fading though, having added as much as 3 percent on Wednesday after a third surprise weekly drop in US crude stockpiles boosted the demand outlook in the world’s largest oil consumer.
Wall Street rose on Wednesday, with the Nasdaq closing at a record high as the rate decision whetted investor appetite for equities.
If the Bank of Japan is going to keep 10-year yields at zero percent, then any issuance by the government of that duration would come at zero cost, and likely be swallowed substantially by continuing central bank buying – adding up to direct financing of the budget that has been speculated for months.
Winer said he remains concerned how much more stocks can increase in the short-term, with the US presidential election coming and third-quarter company earnings reports around the corner.
That knocked the dollar nearly across the board as investors reduced their expectations for US interest rates.
The statement from the Fed said the case for an increase in the federal funds rate has strengthened but that most members chose to wait for additional data for “the time being”. In Norway, the oil workers’ strike further boosted the commodity.
At 9:36 am ET (1336 GMT), the Dow Jones Industrial Average was up 132.52 points, or 0.72 per cent, at 18,426.22.
US crude (WTI) futures advanced 1 percent to $45.83 after soaring 2.9 percent on Wednesday.
Markets will be closely analysing upcoming US data such as GDP, non-farm payrolls and inflation for clues on the direction of rates.
Hong Kong’s Hang Seng Index rose by 0.4 percent, while Australia’s All Ordinaries Index climbed by 0.7 percent.
“The Norges Bank had a meeting today and they sounded much less dovish than what the market had expected”, said Charles St-Arnaud, senior strategist and economist at Nomura Securities International in London.
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USA jobless claims fell to their lowest level since July in the past week, according to the Labor Department.
