MTS Help Center

·       The dollar hovered near a two-week low against its peers on Tuesday as cautious comments by Federal Reserve officials over the global outlook and weak data at home raised questions over whether the U.S. central bank will slow down its rate increases.

The dollar index, a gauge of its value versus six major peers, traded marginally lower at 96.17 on Tuesday. The index fell nearly half a percent last week, its biggest weekly drop since late September.

·       However, some analysts believe the dollar can stage a comeback.

“William’s comments are justified but are not as dovish as the comments made by Clarida and Kaplan last week. The market may rethink whether it read Friday’s comments as overly dovish which may lead to a reversal in dollar weakness,” said Ray Attrill, head of currency strategy at NAB.

Attrill added that safe-haven buying can return to the dollar if global equities keep correcting and their volatility continues to rise.

“If we see the VIX (volatility index) at 25, I would expect the dollar to pick up steam.” The index is currently at 20.10.

·       The Japanese yen traded flat to quote at 112.55. It had hit 112.38 earlier in the trading session, its highest level in November. But analysts think that further strength in the yen is unlikely.”We are not seeing Japanese investors retreat from the U.S. and foreign markets...flow numbers show that Japan remains close to fully invested abroad,” said Attrill. “This gives support to dollar/yen.”

·       Nonetheless, the euro was well bid in early Asian trade at $1.1456. The single currency has gained two percent versus the dollar over the last five trading sessions despite the ongoing standoff between the European Union and Italy over its free-spending budget, which breaks EU fiscal norms.

·       Goldman Sachs believes the U.S. economy will slow significantly in the second half of next year as the Federal Reserve continues to raise interest rates and the effects of the tax cut fade.

"Growth is likely to slow significantly next year, from a recent pace of 3.5 percent-plus to roughly our 1.75 percent estimate of potential by end-2019," wrote Jan Hatzius, chief economist for the investment bank, in a note to clients on Sunday. "We expect tighter financial conditions and a fading fiscal stimulus to be the key drivers of the deceleration." 

·       The Federal Reserve is still expected to raise interest rates again next month and three times next year, but a strong majority of economists polled by Reuters over the past week say the risk is it will slow that pace down. 

The probability of a U.S. recession in the next two years, while still low, also nudged up to a median 35 percent from 30 percent in the latest monthly Reuters survey of economists taken Nov 13-19. It held at 15percent for the next 12 months.

·       China’s opening up of its economy will help it cope with the trade frictions with the United States, a central bank adviser said on Tuesday, adding that China cannot go backwards on its market reforms.

But China will forge ahead with its reforms at its own pace, Liu Shijin, an adviser to the People’s Bank of China (PBOC), said at a finance forum in Beijing.

·       A panel advising Japanese Finance Minister Taro Aso urged the government on Tuesday to go ahead with a planned sales tax hike next October, taking all steps needed to prevent a downturn while also avoiding fiscal expansion.

Abe has vowed to hike the nationwide sales tax to 10 percent from 8 percent in October 2019 as planned, barring an economic shock, to meet the cost of social welfare as part of a plan to achieve Japan’s elusive balanced-budget goal in fiscal 2025.

·       Oil fell on Tuesday, folding under the weight of a broad stock market sell-off that undercut support to prices earlier in the day from expectations that OPEC will introduce new output curbs.

Brent crude oil futures, the international benchmark for oil prices, were at $66.37 a barrel at 0752 GMT, down 42 cents, or 0.6 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $56.94 per barrel, 26 cents, or 0.5 percent, below their last settlement.

Oil prices are around a quarter below their recent peaks in early October, weighed down by surging supply, especially from the United States, as well as a slowdown in global trade.

Reference: Reuters, CNBC