Treasuries gain as Fed minutes show division on rate-hike path

US Dollar: Inflation Data Could Be Key to Diagnosing Fed Indecision

A rate hike would likely see the price of gold fall as it increases the opportunity cost of bullion, which doesn’t pay any interest or a dividend, while also boosting the dollar which tends to pull in the opposite direction to the yellow metal. More recently, Brexit (Great Britain’s vote to leave the European Union) caused an influx of funds into USA financial assets, resulting in a stronger dollar relative to the British pound.Monetary policy affects the expected return of domestic assets relative to the expected return of foreign assets by changing interest rates.

The odds of an interest-rate increase at the September 20-21 meeting of the Federal Open Market Committee are about 22 percent, according to pricing in federal funds futures, with the probability of a hike by December at 50 percent.

The SP 500 has ticked up 0.1% to 2,179.41 at 2:20 p.m. today, while the Dow Jones Industrial Average has advanced 8.87 points, or 0.1%, to 18,560.89.

“But if the dollar breaks below 99 yen, the market will enter its next phase”, he said, adding that forthcoming USA economic data or comments from Federal Reserve officials could provide the impetus for such dollar-selling.

Japan’s benchmark Nikkei 225 is now up 0.9%.

The Fed officials’ comments also moved U.S. Treasuries and the dollar, with yields on two-year notes touching a near three-week high of 0.7580 percent, as expectations for a rate hike prompted investors to sell shorter-dated Treasuries. The Wall Street Journal Dollar Index, which measures the USA currency against the currency of 16 other countries, was recently down 0.1% at 85.52; the measure was as high as 85.98 earlier in the session. The dollar was down 0.79 percent against the franc at 0.9538 franc and was down 0.29 percent against the yen at 99.95 yen.

The euro rose more than 1 percent against the dollar, while the dollar fell more than 1.5 percent against the yen and more than 1 percent against the Swiss franc.

The dollar briefly pared losses after comments from Dudley on Thursday reinforced the influential policymaker’s positive message on the broader economy.

“Many still believe the Fed has a chance to hike later in the year”, said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago.

SPDR Gold Trust (NYSEArca:GLD) increased 1.8 tonnes on Tuesday to 762.23 tonnes after losing 11.9 tonnes on Monday, which was the largest 1 day outflow since 12th July 2016.

Crude oil prices hit a monthly high after an unexpected build in inventories.

Korea’s most liquid Samsung Electronics fell 0.13 percent to reach 1,566,000 won, while Celltrion, the No. 1 on Kosdaq, saw its shares climb 1.24 percent to reach 113,900 won.

USA stocks are trading slightly up on Wednesday.

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