Asian currencies languish on Yellen comments and foreign outflows

The US dollar got a solid lift after Yellen said “persistently easy monetary policy” could lead to developments that could have “adverse implications for financial stability”, in a speech to the US National Association of Business Economics.

“Finally, I would note the possibility that inflation may rise more sharply in response to robust labor market conditions than anticipated”.

In New Zealand, RBNZ policymakers are scheduled to gather later today to decide on interest rates, which are projected to remain steady at a record low of 1.75% until the end of the year. The Nasdaq Composite Index gained 34.19 points, or 0.54 percent, to 6,414.36. US prices had rallied on Monday, with the gains spurred in part by a threat from Turkey’s president to cut off oil exports from a Kurdish region of Iraq.

If inflation stays low, the Fed may need to gradually increase the key short-term interest rate.

The index is down by 9.7% since US President Donald Trump’s inauguration.

“As we saw with the German elections, the populist undercurrent is still there in Europe”, Charles Diebel, head of rates at Aviva Investors on London, said in an interview with Bloomberg TV’s Mark Barton.

The U.S. Dollar rose on Yellen’s statements and U.S. interest rate futures prices dipped further to price in about 70 percent chance of a rate hike by December compared to near 60 percent on Monday. Meanwhile, silver fell sharply after losing 1.87% of its value, yielding up to 16.86 dollars per troy ounce. United States new home sales eased to 560,000 in August from 580,000 in July.

-The MSCI Emerging Market index sank 0.8 percent to the lowest in more than a month. -North Korea tensions limited losses in gold, said Yuichi Ikemizu at ICBC Standard Bank in Tokyo. The world equity markets took this as a positive sign that a strengthening US economy and rising inflation will help the other major industrialized countries’ economic growth prospects, as well as reignite some wanted inflation. The euro was at $1.1756-1757, down from $1.1812-1813, and at ¥132.48-49, up from ¥132.01-02. Yellen’s comments reflected those from a paper released this week from the San Francisco Fed, where economists anxious that a lower “neutral rate”, or that which keeps the economy in equilibrium, also limits the monetary policy options.

The broader oil & gas index, which has lost around 4 per cent so far this year, added 0.5 per cent as Brent crude touched its highest level in more than two years, before easing back on profit taking. It traded at 80.80 yen from 80.78 yen, fell to 53.55 British pence from 53.73 pence and rose to 91.29 Australian cents from 91.17 cents.