• The U.S. dollar rose to a more than seven-week high against the yen on Monday, supported by a rise in U.S. Treasury yields, as traders waited on an impending Federal Reserve meeting for clues on whether U.S. interest rates could rise again by year-end.
The dollar was up 0.51 percent against the Japanese currency at 111.4 yen.
The dollar index .DXY, which tracks the greenback against six major currencies, was up 0.14 percent at 92.002.
• The Fed meeting, which starts Tuesday, is expected to yield details on how the central bank will unwind its $4.2 trillion portfolio of Treasuries and mortgage-backed securities, nearly a decade after the global financial crisis.
Investors awaited more clues on the timing of the next rate hike from Fed Chair Janet Yellen.
• Investors are far from persuaded the Fed will move on rates again this year, with a December change put at less than a 50 percent probability in the futures market.
• Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York, said “the primary reason U.S. yields are creeping up is that thinking about it clearly, the market has decided that the Fed is unlikely to change the December 2017 dot - still saying they expect one more rate hike in 2017.”
• Benchmark 10-year Treasury notes US10YT=RR were last down 8/32 in price to yield 2.229 percent. The yield fell to 2.016 percent on Sept. 8, the lowest since Nov. 10, 2016.
• The Federal Reserve hopes to pull off the wind-down of its massive balance sheet with minimal market impact, but even a slow withdrawal may increase strains in a crucial section of the bond market.
Any reduction in the U.S. central bank’s balance sheet could make it harder for banks and investors to borrow certain Treasuries in the repurchase agreement market, making it more difficult and expensive to bet on or protect against interest rate increases.
The Fed’s wind-down could also create an uptick in the number of loans that are not settled on time, a problem that has worried regulators including the New York Fed in the past.
• The Bank of Japan is widely expected to maintain its massive asset-buying campaign at a meeting on Thursday
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.
• Canada has already raised interest rates twice in recent months, while the Bank of England shocked many last week by flagging its own coming increases. The European Central Bank, meanwhile, is expected to shed more light on plans to exit its extraordinary stimulus next month.
• Global crude oil prices slipped slightly Monday but stayed close to multimonth highs as traders braced for a potential stockpile build, expected later this week.
Brent crude futures LCOc1 settled 14 cents lower at $55.48 a barrel, near an almost five-month high of $55.99 touched on Thursday.
U.S. West Texas Intermediate (WTI) crude futures CLc1 settled up 2 cents at $49.91, close to Thursday’s near-four month high of $50.50.
Reference: Reuters
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