Dollar eases vs yen as Treasury yields come off highs, Fed awaited

The Fed is widely expected to hike interest rates for the first time in 2016 at its two-day meeting, with markets pricing in a almost 100 percent chance of a quarter percentage point increase to the Fed’s target range of 0.25 to 0.50 percent.

The dollar index, which measures the greenback against a basket of currencies, was down 0.1 per cent at 100.990.

The euro EUR= was trading near a one-year low against the dollar with the single currency changing hands at 1.053 per dollar.

The British pound rose to $1.2677 late Monday in NY, compared with $1.2574 late Friday in NY.

It is the June 14, 2017, FOMC meeting announcement where the odds rise to 44.3% for a 0.75% to 1.00% range go above the odds of fed funds staying flat from December’s (expected) 0.50% to 0.75% range.

USA two-year notes fell 2/32 in price to yield 1.174 percent, while benchmark US 10-year note prices fell 1/32 and its yield rose to 2.482 percent.

The dollar edged up 0.1 percent to 115.43 yen after earlier touching 115.55 yen, its loftiest peak since February.

MSCI’s all-country world stock index .MIWD00000PUS was up 0.7 percent, the pan-European STOXX 600 share index .STOXX ended up 1.1 percent. One is that Trump’s tax and spending plans don’t hike the US budget deficit.

Given that the fed funds rate is now 0.25% to 0.50%, and that the Fed tends to move rates in quarter-point increments, it could be many more steps before a stumble. Meanwhile, prospects of fiscal stimulus have been driving Treasury rates higher. The common currency had gained 0.7 percent overnight, helped by higher German bund yields and on relief as Rome was seen ready bail out Italian bank Monte dei Paschi di Siena.

Wall Street, for its part, has already signaled its response to Trump’s election: Investors have sent stock prices surging to record highs and driven up longer-term rates in anticipation that Republican control of the White House and Congress will allow Trump to cut taxes, ease regulations and accelerate infrastructure spending. “From a technical standpoint, the current bullish momentum could encourage buyers to push the pair towards Yen117.50 in the short term”. The dot-plot and Janet Yellen’s press conference are going to be the key on whether dollar bulls can continue pushing higher or a correction is due.

As a result, the Fed is not expected to alter its economic forecasts or predictions for interest rates over the next three years, according to economists, with two rate hikes now pencilled in for 2017. There is also a lack of trading pairs with the USA dollar which means if their owners’ want to convert to United States dollars they will need Bitcoin to act as the conduit. “The likely pain precedes the uncertain gain when it comes to Trumponomics and the Fed is likely to buy some time to assess this risk by retaining a very gradual bias on future rate moves”.

Resource currencies such as Canadian and Australian dollar strengthened against the buck on Monday as oil prices jumped to above $52 a barrel.

Yesterday, the Bank of Israel set the shekel-dollar representative rate up 0.105% today compared with Friday’s rate at NIS 3.822/$, and the representative shekel-euro rate was set up 0.081% at NIS 4.055/€. Nine stocks fell on the New York Stock Exchange for every five that rose.