Dollar rises against yen ahead of Fed meeting

Andrew Cummings
September 19, 2017

ANALYST'S TAKE: "On the political front, no prizes for guessing that North Korea will top the agenda of President Trump's address to the gathering of world leaders at the U.N.", Rob Carnell of ING said in a report.

The Fed is also expected to release some of the details of its plan to trim its balance sheet. The Nasdaq composite added 0.3 percent to 6,448.47.

Thirteen of the 20 most active stocks ended in the green, led by developer Filinvest Land Inc. which climbed 5.4 percent to P2.13 and conglomerate Ayala Corp. which advanced 4.7 percent to P972.

Yields have risen ahead of the Fed's Tuesday meeting.

A possible new rate hike would make home-buying more expensive and increase monthly payments for credit cards.

"The anticipated announcement of the start of balance sheet normalisation and the likelihood of the Fed keeping the option of a December rate hike alive has been the catalyst for last night's United States dollars move", traders at HiFX said in a note.

Another rate hike is unlikely this time around as the disruptions caused by Hurricanes Harvey and Irma have distorted the overall picture of the U.S. economy (witness the spike in initial jobless claims in what has been an otherwise uninterrupted downtrend). Set against the recent hawkish shifts by the European Central Bank (ECB) and now the Bank of England (BoE), the Fed is lacklustre by comparison.

Yields on US 10-year Treasuries jumped a hefty 14 basis points last week, but still trailed the United Kingdom where yields on 10-year paper surged 30 basis points.

On Monday, the pound was a shade softer at $1.3585 but not far from the peak of $1.3615.

Dow e-minis 1YMc2 were up 60 points, or 0.27 percent, with 15 contracts changing hands. "There could also be some more political action in Japan before long, as the media is suggesting that (Prime Minister Shinzo) Abe may call a snap election next month amid his rising approval rating and fragile opposition".

Against a basket of currencies, the dollar was idling at 91.869 and still uncomfortably close to the recent 2½-year trough of 91.011. Reducing the balance sheet is a form of monetary policy tightening. The euro was little-changed at $1.1944. Brent crude, used to price global oils, dropped 37 cents to $55.25 in London.

ENERGY: Benchmark U.S. crude added 2 cents to $49.91 per barrel in electronic trading on the New York Mercantile Exchange.

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