Despite US Rate Increases, the Dollar's Biggest Gains Look Done for Now

19 March, 2017, 01:07 | Author: Elaine Woods
  • Stocks rose and easily absorbed the latest increase in interest rates by the Federal Reserve a move that was widely expected

With support showing-up around this key level, we may be seeing the rate hike that's largely-expected to take place later today being priced-in.

At 3:13 p.m., the Dow Jones Industrial Average was down 34.93 points, or 0.17 percent, to 20,915.17, the S&P 500 had lost 5.85 points, or 0.25 percent, to 2,379.41, and the Nasdaq Composite had dropped 5.46 points, or 0.09 percent, to 5,894.59. The S&P 500 rose 0.8 percent one day after the Fed's decision.

Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

Still, some market strategists see near-term headwinds for precious metals, especially since the bullish sentiment spurred by President Donald Trump's proposals to juice the US economy through fiscal-stimulus measures haven't entirely vanished.

After jumping almost 2 percent in the wake of the Fed meeting, the lira slipped 0.4 percent on Thursday.

Analysts said the election this week in Holland had calmed concerns over political risk in Europe, as Dutch center-right Prime Minister Mark Rutte fought off the challenge of anti-Islam and anti-EU rival Geert Wilders. After Britain's vote in summer to exit the European Union, investors wondered whether the Dutch election and others scheduled later this year on the continent could lead the European Union to break apart.

SOME CENTRAL BANKS FOLLOW THE FED: China's central bank raised a short-term interest rate on lending to banks but left its benchmark rate unchanged after the US increase.

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The 10-year Treasury yield fell to 2.51 percent from 2.54 percent late Thursday.

"Even though the dot plot is not relevant because so much can change, the Fed reminded us all of the gradual nature of their expected behaviour on this rate hike cycle", said Peter Boockvar, chief market analyst at The Lindsey Group, in a Wednesday note.

The central bank's rate increase was spurred by steady economic growth, strong job gains and confidence that inflation is rising to the central bank's target.

Data:French inflation rose 1.2% (http://www.marketwatch.com/story/french-inflation-confirmed-as-slowing-in-february-2017-03-15) on the year in February, slowing from January's rate, statistics agency Insee said.

On Thursday, Hong Kong stocks were up 1.7 percent, Shanghai adding 0.8 percent and Seoul advancing 0.8 percent.

The yellow metal was trading 0.20 per cent, or Rs 50, up at 28,467 per 10 gram, while the white metal was up 0.31 per cent, or Rs 124, at Rs 40,722 per 1 kg.

CURRENCIES: The euro from dipped to $1.0746 from $1.0749 late Thursday, and the British pound fell to $1.2367 from $1.2358.

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