Forex - Dollar Gains in Asia As Fed Views Support, BoJ Ahead

Posted September 22, 2017

The central bank is expected to announce plans to begin unwinding its US$4.2 trillion (RM17.6 trillion) portfolio of Treasuries and mortgage-backed securities, almost a decade after the global financial crisis.

"Our balance sheet will decline gradually and predictably", Fed Chair Janet Yellen said in a press conference Wednesday after the policy decision. But continuing ultra-low interest rates or bond-purchase programs for too long could spark a sudden and sharp increase in prices.

The Nikkei was recently up 0.7%, putting it just 2% away from hitting levels last seen in 1996.

Oil prices were set for their largest third-quarter gain in 13 years, after the Iraqi oil minister said OPEC and its partners were considering extending or deepening supply cuts. "But it also cut its long-term interest rate projection and this has somewhat slowed the dollar's gains versus the yen by causing the US yield curve to flatten", said Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo.

The U.S. 10-year Treasury yield had reached a one-month high of 2.237 percent on Monday.

The US central bank's Federal Open Market Committee (FOMC) held its main Fed funds rate at a range between 1%-1.25%, retaining an "accommodative" stance that it expects will support further strengthening of the labour market and a return to its target rate of inflation at 2%. The economy has added more than 15 million jobs since the worst of the crisis, and the United States is now in the midst of the third-longest economic expansion in the nation's history.

Anadarko Petroleum rose 4.3 percent after the oil producer said it would spend US$2.5 billion to buy back its stock.

Interest rate futures traders are now pricing in a 72-percent chance of a December rate hike, up from roughly 60 percent before the statement, according to the CME Group's FedWatch Tool.

Dow e-minis were down 10 points, or 0.04 percent, with 4 contracts changing hands.

In Australia, the S&P/ASX 200 lost 0.94% to close at 5,655.42, with gains in the energy subindex being offset by losses in most other sectors. The key takeaway from the Import-Export Price Index report for August is that it will keep the possibility of a December rate hike on the table.

Spot gold experienced a rise at about 0.2 per cent to $1,313.50 an ounce on the said period as the United States gold futures for December delivery soared by 0.5 per cent at $1,317.40 an ounce as well.

Shares of Apple fell 1.7 per cent after it admitted its latest smartwatch has connectivity problems.

Advancing issues outnumbered decliners on the NYSE by 1,809 to 968.