NEW YORK, Sept 13 (Reuters) – The U.S. dollar hit a one-week high against a basket of six major rivals on Tuesday as focus turned to the likelihood of a December Federal Reserve rate hike, while declines in riskier commodity currencies also boosted the dollar. When looking at last Friday’s price action, all major USA indices dropped by more than 2%., Wwhile gold and US 2-years treasury bonds, which are supposed to be more sensitive asset classes to changes in monetary policy, just fell slightly.
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Most Japanese stocks ended higher after Japan’s Topix index fluctuated throughout the day before closing little changed. Stock markets around the world edged higher Thursday, May 26, 2016, as traders interpreted the rise in oil prices to $50 a barrel for the first time this year as a positive sign for the global economy.
Financial markets were on edge before Brainard’s speech after several Fed officials in recent days signaled a willingness to discuss a rate hike at their meeting next Tuesday and Wednesday.
ANALYST’S COMMENT: “The continuous debate surrounding the prospect of a USA rate rise continues to dominate market sentiment as US policymakers continue to gear up the markets for a further rate rise later this year”, said Michael Hewson, chief market analyst at CMC Markets.
Brainard is among the Fed’s top “doves”, who believe the central bank should be cautious about raising rates.
“For the record, Brainard gave similar arguments previous year in speeches on November 6 and December 1, shortly before the Fed raised the discount rate”, said Jay Morelock, an economist at FTN Financial, in a note. The FTSE 100 index of leading British shares was down 0.5 percent. Markets are pricing in a 15% chance of a rate hike at the Fed’s September 20-21 meeting, according to Investing.com’s Fed Rate Monitor Tool.
Japan’s Nikkei closed up 0.3 percent. That was down from about 35 percent in late August, when some Fed officials openly discussed the possibility of a September rate hike. The Nasdaq composite lost 56.63 points, or 1.1 percent, to 5,155.26.
The yield on the benchmark 10-year Treasury note fell 2 basis points to 1.653 percent, the yield on 5-year bond dipped more than 1 basis point to 1.190 percent and the yield on short-term 2-year note slid almost 1 basis point to 0.766 percent by 11:00 GMT. The GBP/USD was down 0.43% at $1.3272, with the daily price ranging from $1.3277 to a peak of $1.3342. USA shares were set to drift higher with Dow futures flat and S&P 500 futures up 0.1 percent at 2,123.60.
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Tesla Motors rose 2.0 percent after announcing that it upgraded its Autopilot software to use more advanced radar technology.
