United States dollar closes higher on Taipei forex

The probability of a USA rate hike in December has been steadily increasing after the US Federal Open Market Committee’s meeting last Wednesday, according to the CME Group FedWatch – a tool to gauge the market’s view of an interest rate hike.

While no decision on rates have been made, policymakers expect the economy will continue to grow at a pace that justifies gradual tightening in monetary policy, Yellen said at a hearing of the House Financial Services Committee Wednesday. In its September meeting, the Fed held off the first rates hike off their historic lows citing the global economic slowdown. The board member did however say that the Federal Reserve is not that far from its 2 percent inflation target.

The Fed’s benchmark rate has been at record lows since 2008 to stimulate the economy and create jobs.

“The dollar is being bought gradually, with markets pricing in the rate increase as data come out and yields rise”.

“The report strengthens our conviction the Fed will hike in December”, said Dana Saporta, a US economist at Credit Suisse.

“Fed officials appear to be setting up for the move”. “We have seen few signs recently indicating a change of tack in the oil markets”, said French investment bank Natixis.

Thomas Simons of Jefferies wrote to clients of the Fed, “Barring a complete disaster in November [payrolls], they are on track” for December liftoff. A Bloomberg survey of 20 developing-nation countries found extended losses on Thursday, and fears of a rate hike may increase these losses further in the coming days.

“It’s been a long time that interest rates have been at zero, but markets and the public should be thinking about the entire path of policy rates over time”.

They said the weakness of the won against the US dollar prompted the local central bank to enter the trading floor, buying into the USA dollar and sending the Taiwan dollar lower.

“It’s more likely that the market will move closer to the three to four hikes that the dots were pointing to per year, not the one or two that was priced into the market one or two weeks ago”, Englander said.

As we wrote about before, October was the strongest month for stocks in 4 years.

With the European Central Bank all but promising to go the other way – providing more policy stimulus – the euro slid to its lowest in over three months at $1.0843 EUR= overnight, and was last slightly higher at $1.0870.