· The dollar climbed to a one-month high and bond yields rose on Wednesday as risks grew for a U.S. interest rate hike in December, while Asian stocks hovered near multi-week lows as tensions in the Korean peninsula remain elevated.
The market is now waiting to hear from U.S. President Donald Trump on his tax reform plans as he remains under pressure to produce a legislative victory with the collapse of the latest Republican push to repeal Obamacare.
That sent the dollar to its highest level since Aug. 31 against a basket of currencies and was last holding at 92.966.
The yield on benchmark 10-year Treasury notes was up at 2.24 percent after rising 2 basis points overnight.
In currencies, the euro held at more than one-month lows at $1.1781 as investors faced months of political horse trading in Germany before a new government could be formed.
The dollar stood near a 2-1/2 month high on the yen at 112.27 helped by rising U.S. Treasury yields.
· The Federal Reserve needs to continue gradual rate hikes despite broad uncertainty about the path of inflation, Fed Chair Janet Yellen said on Tuesday in remarks that acknowledged the central bank’s struggles to forecast one of its key policy objectives.
It is possible, Yellen said, that the Fed may have “misspecified” its models for inflation, and “misjudged” key facts like the underlying strength of the labor market and whether inflation expectations are as stable as they seem, and central bankers need to remain open to that possibility as they decide on policy.
Still, recent low inflation was likely a reflection of factors that would fade over time and despite uncertainties, it “would be imprudent to keep monetary policy on hold until inflation is back to 2 percent,” Yellen said in a 37-page address to the National Association for Business Economics
· Earlier in the session, Atlanta Fed Chief Raphael Bostic, a non-voting member this year, said he would want “clear evidence” that prices were firming before committing to another rate increase, but did not rule out another hike in 2017.
· Chances of a rate hike in December rose to 78 percent from about 40 percent a month ago, according to CME Group’s FedWatch tool.
· U.S. consumer confidence fell in September and home sales dropped to an eight-month low in August due to the impact of Hurricanes Harvey and Irma, supporting the view that the storms would hurt economic growth in the third quarter.
· U.S. Republicans on Tuesday fell short yet again in their seven-year drive to repeal Obamacare, in a bitter defeat that raises more questions about their ability to enact President Donald Trump’s agenda.
President Donald Trump told U.S. lawmakers on Tuesday he wants bipartisan cooperation on tax reform, as pressure on him to produce a legislative victory on any front escalated with the collapse of the latest Republican push to repeal Obamacare.
The administration and Republicans in Congress are due to unveil a tax plan on Wednesday. The plan has been developed over several months by six White House and congressional Republicans working behind closed doors and with no input from Democrats.
· President Donald Trump warned North Korea on Tuesday that any U.S. military option would be “devastating” for Pyongyang, but said the use of force was not Washington’s first option to deal with the country’s ballistic and nuclear weapons program.
· The United States on Tuesday unveiled draft text on labor standards during the negotiations on modernizing the North American Free Trade Agreement as top officials from Canada, the United States and Mexico joined talks in Ottawa.
The U.S. said the labor proposal would ensure enforceable mechanisms to raise labor standards in the NAFTA but Canadian labor unions said it was inadequate.
· A Japanese party being launched by popular Tokyo Governor Yuriko Koike is in merger talks with the main opposition Democratic Party, the Nikkei business daily reported on Wednesday, adding uncertainty to the outlook for a general election next month.
The Nikkei said Koike met Democratic Party leader Seiji Maehara on Tuesday to discuss the possible merger, which could also include another small opposition party.
· Brent LCOc1 settled 58 cents, or 1 percent, lower at $58.44 a barrel after hitting $59.49, its highest since July 2015 and more than 34 percent above their 2017 low.
U.S. crude futures CLc1 closed 34 cents, or 0.7 percent, lower at $51.88 a barrel, after hitting a five-month high of $52.43.
Oil prices ended 1 percent lower on Tuesday after investors took profits following a rally to 26-month highs spurred largely by threats from Turkey to cut crude exports from Iraq’s Kurdistan region.
The market was also under pressure ahead of weekly U.S. oil inventory data that was expected to show a fourth straight week of crude builds.
Reference: Reuters
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