Bond markets greeted the rate Fed minutes with cautious optimism with the iShares iBoxx $ High Yield Corporate Bond ETF poised to set a fresh one-year high.
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“There’s some level of momentum that’s been built into dollar weakness this year, tied to Fed expectations”, said Phillip Nelson, Boston-based director of asset allocation at NEPC LLC, a consultant that advises corporations, pension funds and endowments managing US$925 billion (RM3.6 trillion).
The minutes came a day after New York Fed President William Dudley said “it’s possible” to raise rates at the September 20-21 policy meeting and Atlanta Fed President Dennis Lockhart said a hike next month is in play.
Major U.S. stock averages last traded about flat, slightly higher than before the minutes’ release.
1 to hold the Fed’s benchmark interest rate steady at the meeting that ended July 27.
“Maybe a year or two ago, you would say wages were rising at a 2% annual rate, now you’d probably say wages were rising at a 2.5% rate”, Dudley said.
“We have to wait for the minutes of the meeting to have a better idea of when they will proceed with the rate hike”. South Korea’s foreign reserves jumped to a record high in July, the central bank said on August 5, 2013, appearing to support traders’ suspicions of dollar-buying intervention by currency authorities last month. The next meeting of the Fed’s Open Market Committee is September 20.
The dollar sank below the 100 yen mark, falling to 99.94 yen from 100.28.
“Despite their willingness and desire to raise rates, they haven’t gotten cooperation from the economy yet”, said Bucky Hellwig, senior vice-president at BB&T Wealth Management in Birmingham, Alabama.
The minutes said “a couple” of officials had advocated a rate increase at the July meeting.
However, some officials were still concerned that longer-term global risks related to Brexit vote remained.
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Although the risks toward the U.K.’s vote to leave the European Union, known as the Brexit, seemed a lesser concern for the Fed, the FOMC said it would continue to “closely monitor economic and financial developments overseas”. “Indeed, these reports reinforce my view that labor market conditions continue to improve”. However, the majority of the group agreed that waiting would give them more time to assess whether the economy was strong enough to withstand the potential aftershocks when the Fed does raise rates.
