A measure of implied volatility known as the VIX spiked 8.6% to 13.45, the highest level since early July.
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“The market is becoming increasingly nervous about Yellen’s upcoming speech after several Fed members (suggested) that the Fed was on its way to finally pushing the button” and raising rates, Arnaud Masset, market analyst at Swissquote Bank, told USA TODAY via email.
The index’s 0.82 per cent risen this year is the smallest among the sectors as the Fed backtracked on the number and timing of rate hikes for the year.
Recent hawkish comments from Fed Vice Chairman Stanley Fischer and New York Fed President William Dudley have raised some investors’ expectations that Yellen might shift to a less cautious stance.
“While recent Fed officials have signaled that rates could rise as early as September, Mrs. Yellen’s reputation as a policy dove has kept many traders skeptical that she’ll echo last week’s hawkish Fed comments”, said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
“Equally, should she keep the cards close to her chest as she has opted to in the past, markets may take this as a sign that she is still far from convinced and could push back rate expectations even further”.
Singapore shares ended 0.7% higher and posted their biggest single-day gain in two weeks.
Strength in the dollar helped push gold a touch lower on Wednesday. “In acknowledging the limitations of monetary policy, Yellen will also argue for the need for fiscal policy to play a more significant role as a complementary tool to monetary policy”.
“Markets are going to be quiet until Friday as everyone is waiting for some clues from Janet Yellen’s speech”, said Kent Li, deputy incharge for bullion desk, Wing Fung Precious Metals.
The euro was down 0.2 percent at $1.1280.
Still, some analysts remained bullish on gold, pointing to a later interest rate hike by the Federal Reserve (Fed) due to ongoing external risks to the United States economy.
Global markets awaited Yellen’s speech in Jackson Hole, Wyoming, on Friday for insight on the US monetary policy outlook. The Australian dollar edged down to $0.7596, having been trapped for the past three sessions in a narrow band of $0.7584 to $0.7612.It touched a three-month high of $0.7760 earlier in August but has recently been plagued by conflicting views on US monetary policy. “Given this, the central bank wants to normalize rates as soon as they can”.
Oil fell as industry data showed U.S. crude stockpiles expanded, adding to a global glut of supply. The consumer discretionary sector finished down 0.4%. In addition, long-short investors are around 56 percent long – the highest since July 2015.
NY gold futures for December delivery settled down 1.2% at US$1330 an ounce.
Oil prices tumbled on Wednesday, with US crude settling about 3 percent lower, after an unexpectedly large inventory build in the world’s biggest oil consumer renewed worries about oversupply.
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United States stocks closed higher last night, while Asian shares have been mixed this morning ahead of the central banker’s gathering.
