Global stocks, dollar up as investors turn eyes to Fed

The dollar held steady at near 8-week highs versus the yen on Tuesday, with investors awaiting the Federal ReserveĀ“s policy statement this week for fresh hints on the possible pace and timing of further US monetary tightening.

The focus for this week is the Fed’s September 19-20 policy meeting.

Benchmark 10-year Treasury notes were last down 8/32 in price to yield 2.229 per cent.

New Zealand’s dollar was down 0.7 percent at $0.7309, with its rally the previous day losing steam against a broadly stronger dollar.

Markets are now pricing in a more than 50 percent chance of a Fed hike by the end of the year, up from only around a 40 percent chance less than a week ago, according to CME FedWatch, having brought forward their bets after a strong USA inflation print last week.

That marked a rise of 22 basis points from 10-month lows set on September 8, when USA bond yields fell on risk aversion, partly stemming from concerns about U.S.

The greenback was just 0.1 percent lower at 111.47 yen, below its eight-week peak of 111.87 set earlier on Tuesday.

Political uncertainty may have a part to play in the BOJ’s thinking. Sources told Reuters on Sunday that Japanese Prime Minister Shinzo Abe was considering calling a snap election for as early as next month to take advantage of his improved approval ratings and disarray in the main opposition party.

The European Central Bank is widely expected to say next month that it will begin scaling back its asset-purchase stimulus program from January, even though a stronger euro, which dampens inflation, has complicated the outlook.

The Dow Jones industrial average rose 39.45 points, or 0.18 percent, to end at 22,370.8, the S&P 500 gained 2.78 points, or 0.11 percent, to 2,506.65 and the Nasdaq Composite added 6.68 points, or 0.1 percent, to 6,461.32.

All three major US stock indexes hit record closing highs, with financial shares providing the biggest boost.

“You just had that little momentum spurt after it went through 2,500 but it is kind of running out of steam and is going to bide its time until Wednesday, when they listen to (Fed chief) Janet” (Yellen), said Ken Polcari, director of the NYSE floor division at O’Neil Securities in NY. It was 0.2 percent higher on Monday.

Shares of Amazon.com were down 1.4 percent.

The crown was up 0.4 percent at 9.314 per euro and 0.7 percent firmer against the dollar at 7.82 crowns.

Talk of monetary tightening and a bounce in the dollar put gold on the defensive.

In emerging markets, the Mexican peso fell 0.3 per cent to 17.8125 peso per United States dollar following reports of extensive damage to buildings in Mexico City in the aftermath of the second major quake that rocked that country in less than two weeks. Oil prices were higher, but pared gains after data showed a bigger-than-expected build in USA crude inventories.

USA crude futures rose 2 cents to settle at $49.91, while Brent crude futures were down 32 cents at $55.44.

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