Dollar rallies to ¥112.80 on hopes for USA rate hike, tax reform

Posted September 28, 2017

Kevin Logan, chief US economist at HSBC Securities, in NY, said her message is that "they're not really sure" whether the weak inflation is transitory but that "nonetheless policy is accommodative". Most manufacturing names saw declines.

Heightened expectations that the U.S. Federal Reserve will raise interest rates again this year drove gold to a one-month low on Wednesday, extending losses after the biggest one-day loss in nearly two years during the previous session.

The U.S. dollar touched a one-month high against a basket of currencies after Federal Reserve chief Janet Yellen said on Tuesday it would be "imprudent" to keep rates on hold until U.S. inflation hits 2 percent.

At Gold Stock Bull, we have always been predicting that the Fed would not be able to raise rates or remove accommodation at almost the pace that was being projected.

"It should be positive for risky assets and negative for Treasuries", said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co.in NY. Futures with a delivery date in December were traded in the area of about $ 1,301.70.

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Alibaba rose 1.63 percent after the Chinese e-commerce firm took control of logistics unit Cainiao and pledged to spend $15 billion over five years to build out a global logistics network.

"If we can add a bit of clarity and a bit more detail, not just a wish list".

The US dollar has broken technical resistance and the immediate downtrend. "So we do see lower [prices] predicated exclusively due to the monetary tightening by the Fed in the U.S".

New York Fed President William Dudley, among the first US central bankers to speak publicly since a decision last week to hold rates steady for now, cited the soft dollar and strong overseas growth among the reasons he expects slightly above-average USA economic activity and a long-sought rise in wages.

Two-year U.S. Treasury yields climbed to their highest level since October 2008 US2YT=RR while the yield curve flattened to its tightest levels since the third quarter of 2016. These tend to hurt gold. Second, a flare-up in geopolitical tensions could mean renewed safe-haven buying of the yellow metal, he said, citing North Korea and the Middle East, plus political uncertainty continues in the U.S.

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The strength of the dollar negatively affected the price of gold. Persistently easy monetary policy might also eventually lead to increased leverage and other developments, with adverse implications for financial stability.

Inflation has been well below the central bank target recently, which has complicated efforts to normalize monetary policy.

In energy markets, oil prices hit lower despite the EIA report showing that United States crude oil inventories declined by 1.846mn barrels the past week while analysts anticipated oil inventories to increase by 3.422m barrels. White House National Economic Council Director Gary Cohn was reportedly Trump's top pick but fell out of the president's favor in August after criticizing his boss's defense of white nationalist protestors. "If so, stabilising inflation at around 2% could prove to be more hard than expected". He pointed out that the government has to find a way to pay for rebuilding after a heavy hurricane season, plus food prices could rise as a result of damage to growing areas.

Meanwhile, the Fed calculates that cyclical slack in the labor market was now having a "negligible" impact on low inflation readings, compared to oil prices and other changes that will fade.

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