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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: maceng2 who wrote (56408)	10/29/2014 11:04:19 PM
From: elmatador	Respond to of 71475

Dollar jumps as hawkish Fed ends QE Dave Shellock Although the US central bank reiterated that interest rates were likely stay low for a “considerable time”, the impact of the phrase was softened slightly by its addition of explicit language on the data dependency of its future policy path. The Fed upgraded its assessment of employment market conditions by dropping its previous view that there was “significant underutilisation” of labour resources. It nodded to lower inflation expectations and falling energy prices, but added that the likelihood of inflation running persistently below 2 per cent had “diminished somewhat since early this year.” “Changes to the FOMC statement leaned in a hawkish direction, a notable divergence from recent market moves that have priced in a later start to the tightening cycle,” said Dean Maki, an economist at Barclays. But he added: “Overall, today’s statement changes do not change our view that the FOMC will be raising rates in June 2015 based on our view of continued labour market tightening reflected in a falling unemployment rate.” Anthony Karydakis, chief economic strategist at Miller Tabak, argued that the initial reaction of both the Treasury bond and equity markets was exaggerated, saying the Fed’s more upbeat description of the current economic environment did not represent anything new. “This is very simply the acknowledgment of a well-established reality on the ground that has emerged from a wide variety of economic reports in the last several weeks – a reality that markets had already reacted to on a case-by-case basis. “We would expect markets to shake off their initial reaction in the next couple of days and shift their focus toward a more cool-headed assessment of the incoming economic reports ahead.” The dollar was the chief beneficiary of the perception of a more hawkish tone from the Fed. The dollar index, a gauge of its value against a basket of currencies , was up 0.7 per cent – and within sight of a recent four-year high – having been down slightly before the Fed statement was released. The euro was down 0.7 per cent at $1.2643, while the US currency was up 0.7 per cent against the yen at Y108.85. In the government bond markets, the yield on the policy-sensitive two-year Treasury – which moves inversely to its price – was up 7 basis points at 0.49 per cent, after earlier showing a gain of just 1bp. The 10-year yield was up 4bp at 2.33 per cent. Gold extended earlier losses to stand $16 weaker at a three-week low of $1,209 an ounce. Elsewhere in the equity markets, the FTSE Eurofirst 300 index pared an early rise but still ended 0.2 per cent firmer at its highest close in more than a fortnight. The FTSE 100 rose 0.8 per cent. In Tokyo, the Nikkei 225 rose 1.5 per cent to its best level in three weeks. The mood in Tokyo was lifted by news that Japanese industrial output rose 2.7 per cent in September from the previous month, well ahead of expectations. Marcel Thieliant at Capital Economics said the data suggested that Japan’s manufacturing sector has finally turned the corner – but added that a strong recovery was not on the cards. “Despite the rebound in industrial output last month, production still fell by 2.0 per cent last quarter, consistent with another modest drop in GDP,” he said. “Firms predict output to dip by 0.1 per cent month-on-month in October before rebounding by 1.0 per cent in November. However, companies tend to overestimate the future strength in output.” Among industrial commodities , copper rose 0.3 per cent in London to $6,815 a tonne, after a 1 per cent gain on Tuesday, while nickel touched a two-week high before paring its advance. There was a notable rebound for oil prices, with Brent crude settling $1.09 higher at $87.12 a barrel and West Texas Intermediate up 88 cents at $82.30, after the Energy Information Administration reported a smaller than expected increase in US crude stockpiles last week. In Moscow, the rouble sank to a fresh record low against the dollar of Rb 43.217, before rallying slightly, amid speculation that the currency could soon be allowed to float freely.