Fed Chair Janet Yellen said on Wednesday that US growth was looking stronger and rate increases would be needed to keep the economy from overheating and fueling high inflation.
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The yen stepped back to 101.10 to the dollar from a four-week high of 100.10 touched on Thursday after Japan’s top currency diplomat warned Tokyo will take action if needed.
“We expect the BOJ to step up its support for pushing inflation to 2 percent”, BofaML strategists wrote in a preview note.
The S&P 500 capped its best two-day performance in more than two months, while the Nasdaq closed at a record high. It raised rates past year for the first time in almost a decade.
“Our decision does not reflect a lack of confidence in the economy”, Fed Chair Janet Yellen said at the start of her press conference.
While there is another meeting in November, the Fed is unlikely to act then simply because the meeting concludes 6 days before the upcoming Presidential election, which already now appears to be weighing on consumer sentiment, particularly given how unappealing both candidates are.
Concerns over whether the Fed would raise rates prompted a return of volatility to the stock market in recent weeks after two months of calm.
Lower-rated euro zone sovereign yields rose at a faster pace than their higher-rated counterparts, with Spain’s 10-year bonds rising 2 bps to 0.94 percent and Italy’s 10-year gaining 2 bps to 1.21 percent.
“Central banks have already been taking steps to directly influence long-term rates (via bond purchases)”. Brent crude, used to price global oils, rose 33 cents to $47.16 in London. Adobe also reported solid third-quarter results.
The main-share Philippine Stock Exchange index advanced by 86.93 points or 1.13 percent to close at 7,762.35. Brent crude, used to price worldwide oils, rose 64 cents, or 1.4 percent, to $46.52 a barrel in London. On Wednesday, the CAC 40 climbed 0.8 percent, the DAX gained 0.7 percent and the FTSE rose 0.2 percent. Japan’s benchmark Nikkei 225 index jumped 1.9 percent on Wednesday on the news. Apple shares gained 0.7 percent after positive analyst reports. The price of a barrel of Azeri Light crude oil increased $0.79 to trade at $47.57 on the world markets.
Gauges of the US yield curve flattened Wednesday as officials kept the target range for the federal funds rate at 0.25 percent to 0.5 percent.
The U.S. dollar fell to its lowest in a week against a basket of major currencies as investors sold the greenback following the Fed’s reduction of longer-term interest rate expectations. A move back through the 1.1220 area retargets the 1.1300 area while a move below 1.1120 retargets the low 1.1000’s.
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It’s now on to the Fed (02:00pm EDT, Yellen speaks at 02:30pm EDT) where investors are now closely watching if U.S policy makers will hint at future tightening, especially after recent soft USA economic indicators have pared market expectations for higher short-term rates in the near future.
