Dollar close to 2015 lows as conflicted Fed prepares policy update

  • Dollar close to 2015 lows as conflicted Fed prepares policy update

Dollar close to 2015 lows as conflicted Fed prepares policy update

The main market focus is the two-day Federal Open Market Committee meeting that will conclude Wednesday with a statement on monetary policy. Energy stocks also rose as oil prices headed higher.

The double-whammy of Irma and Harvey could shave as much as 0.5 percent off of US GDP in the third quarter, as businesses are disrupted, energy prices rise and hiring weakens.

With the increase on the day, the ten-year yield extended the upward trend seen in recent sessions, reaching its highest closing level in over a month.

USA central bank leaders are expected to hold the key interest rate steady this week, but they may begin trimming a huge bond-buying program that was meant to boost economic growth.

Interest rate futures are now pricing in about a 70 percent chance of a December Fed rate hike according to CME's "FedWatch" tool, up from above 50 percent prior to the Fed meeting and under 40 percent just a few weeks ago.

While the Fed has said the process will be very gradual, to avoid upsetting financial markets, it will act as a slight tightening of monetary policy akin to an interest rate hike. Although no change is expected to interest rates, the USA central bank is expected to start laying the foundations to unwind its $4.5trn balance sheet.

The Fed announced Wednesday that it will let a small portion of its $4.5 trillion balance sheet mature without being replaced, starting in October with reductions of $10 billion a month and gradually rising over the next year to $50 billion a month. There are several vacancies on the Fed board, and there could be a change in leadership early next year if President Donald Trump decides not to renominate Chair Janet Yellen.

The cumulative effect of increasing rates means borrowers are facing rates that are 1% higher than almost a couple of years ago, McBride said.

With the unexpected decrease, existing home sales fell to their lowest annual rate since hitting 5.34 million last August. However low inflation remains a concern, with Yellen admitting the Fed does not fully understand why price growth hasn't picked up pace, still well short of the central bank's two-percent target.

Western Digital slipped more than 4 percent after Japan's embattled Toshiba agreed to sell its semiconductor business to a group led by private equity firm Bain Capital.

US stock indexes declined slightly in early trading Wednesday, Sept. 20, 2017, ahead of the Federal Reserve's latest economic and interest rate policy update.

The dollar stood little changed at 111.455 yen JPY= after climbing to 111.665 overnight, its highest since July 27. Economists surveyed by Bloomberg see the long-run median edging down to 4.5 percent.

Fed policymakers actually revised up their forecast for economic growth this year to 2.4 percent from a 2.2 percent projection in June.

In oil, the United States crude price (West Texas Intermediate) is up over 1.1% to US$50.04 a barrel. Brent crude rose 0.4 percent to trade at $55.36 a barrel, a touch below a five-month high of $55.99 set recently. Australia's S&P/ASX 200 fell 0.1 percent.

Japan's Nikkei .N225 closed up 0.2 percent as the yen's fall against the dollar after the Fed's decision helped sentiment around exporters.