Atlanta Fed President Lockhart Keeps Hawkish View for September Liftoff

Low interest rates have helped boost stocks since the financial crisis, raising some concerns about how the market will react when rates begin to rise.

The New Zealand dollar fell to 88.50 Australian cents from 89.20 cents yesterday.

Still-weak price developments, the dampening impact of a stronger Dollars on inflation expectations and/or continuing uncertainty regarding global growth conditions seem to be driving this sentiment. Lockhart’s comments were “certainly helping” the dollar, he said.

The greenback broke out to a 2-month high of Y125.011 against the Japanese Yen Wednesday, but has since eased back to around Y124.725. Economists had forecast the indicator to fall marginally to 103.2 from 103.5 in June.

The upbeat U.S. services sector data raised expectations for an early interest rate hike by the Federal Reserve, said Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow. In an interview with the Wall Street Journal, Lockhart expressed support for the end of the Fed’s near-zero rate policy next month. “This makes the unemployment rate data print the most important aspect in tomorrow’s payrolls”.

The chances of an interest-rate increase next month reached 52% Wednesday, up from just 38% just two days earlier.

Dennis Lockhart, president of the Fed Bank of Atlanta, said Tuesday the economy is ready for the first rate increase in September.

“The focus for now would be how risk assets such as emerging currencies and stocks will cope with the prospects of a US rate hike”, he added.

“We suspect that we will see a steady grind lower across most commodity complexes, including gold, largely attributable to the strength of the dollar and poor technicals that will only encourage more funds to further increase their short side exposure”, said for CNBC INTL FCStone analyst Edward Meir.

Elsewhere, oil prices dropped to fresh low for recent months after a surge in gasoline stores in the United States.

German 10-year yields, the euro zone’s benchmark, jumped 12 basis points to 0.75 percent. US 30-year bonds were last down 24/32 in price to yield 2.898 per cent, from a yield of 2.861 per cent late on Monday.

The Thomson Reuters/CoreCommodity CRB index rose 0.8 percent. For now the euro has found some support at the 1.0850 level and could inch back towards 1.0900 if the US releases miss their mark.

London copper edged up 0.6 per cent and aluminium rose 0.3 per cent from a six-year low as Chinese data underpinned industrial metals, although gains were capped by a stronger dollar.

Shop prices in the UK were down 1.4% on year in July, the British Retail Consortium said on Wednesday – after slipping 1.3% in June. The US Dollar Index is trying to break through the 98 area and possibly test the 100 level once again, which to this point has proven to be a resistance level that the dollar bulls can not overcome.