Sunday, 19 August, 2018

Traders keep bets on Fed rate hikes after latest meeting minutes

Improved economy likely to result in rate hike Traders keep bets on Fed rate hikes after latest meeting minutes
Nellie Chapman | 22 February, 2018, 16:11

S. Treasury yield hit a four-year high, the dollar rose and stocks fell on Wednesday in a rocky session after the Federal Reserve at its latest policy meeting showed more confidence in the need to keep raising interest rates.

The minutes say that "Members expected that economic conditions would evolve in a manner that would warrant further gradual increases in the federal funds rate".

The Dow is down 421.60 points, or 1.7 percent.

Investors were reacting to data, including wage increases, that suggested inflation might be stronger than in recent years, prompting the Fed to raise rates more quickly.

Looking to the market's response following the release of the statement, both the Dollar and USA equities offered limited engagement though the currency initially slipped (and then recovered) and stocks advanced. The New Zealand dollar gained 0.07 percent to 0.7342.

Kaplan, who does not vote on Fed policy this year but does participate in its regular rate-setting meetings, did not specify his preferred number of rate hikes for this year.

Wednesday's news saw the key 10-year US Treasury yield hit a four-year high and boosted the dollar but sent US equities into reverse with all three main indexes ending in negative territory.

The Australian dollar lost 0.4 percent to $0.7852 and the New Zealand dollar dipped 0.2 percent to at $0.7333.

The lift in U.S. yields saw the United States dollar index, or DXY, lift to the highest level since February 14, extending its rally from the multi-year low of 88.253 struck last week to over 2%.

They now sit just below 3% resulting in a rebound in the USA dollar and late plunge in United States stocks.

The dollar index rose 0.1 percent to 89.805, which was up about 1.8 percent from Friday´s three-year low of 88.251.The greenback rose 0.3 percent to 107.70 yen.

Platinum was about unchanged at $1,000/oz while palladium was down 0.5% to $1,018/oz.

Traders appeared to initially welcome the details in the meeting minutes, which show that a majority of Fed officials at the meeting believed that improving global economic prospects and the effects of recently passed tax cuts had raised the prospect for solid economic growth and for continued interest rate increases in 2018.

After inflation worries knocked the S&P 500 down more than 10 percent from its january 26 high, stocks had rebounded in recent sessions as yields on the 10-year US Treasury note had stabilized around the 2.9 percent mark.

That helped the basic resources index rise 1.6 per cent.

An index that tracks USA manufacturers rose to a almost 3 1/2-year high (http://www.marketwatch.com/story/us-businesses-grow-rapidly-at-start-of-2018-ihs-markit-finds-2018-02-21) in February and a gauge for service-oriented companies hit a six-month peak, according to IHS Markit's flash PMI.

WELLINGTON: The S&P/NZX 50 Index rose 1.26 per cent, to 8,200.27. Small caps bucked the trend and rose +0.12%.

Despite a 0.47 per cent retreat in gold futures, reversing an earlier increase, Kirkland Lake Gold, Guyana Goldfields and OceanaGold Corp retained their gains to be among the 10 biggest advancers on the Toronto exchange.