Seoul: Shares, won end down as Dec US rate hike looms large

Prices are trading near the lowest in five years as signs of resilient US growth cut demand for the metal as a haven and increase the chances that Fed officials will raise rates soon. Futures indicated that stocks on Wall Street would be stable.

It has been almost a decade since the US Federal Reserve last raised its federal funds rate, which may help to explain the apprehension among financial market participants who wonder how markets will react when the Fed finally decides to move its benchmark rate up from the current 0% to 0.25% range.

The inflation outlook, in particular, was not strong enough to justify a rate hike at that time, the minutes said.

William Dudley, the influential president of the New York Fed and a permanent voter on policy, said later on Wednesday that he would “completely agree” with Yellen.

Asked by New York congresswoman Carolyn Maloney, a Democrat, whether the risk of raising rates in December outweigh the benefits, Yellen said that the committee has made no decision yet but that December rate hike was still a “live possibility”. The British pound fell 1.2 per cent on Thursday, its biggest drop since late August, after the Bank of England’s governor dismissed the view it would raise interest rates shortly after the Fed.

Yellen said the Fed has implemented more-stringent requirements to require banks to hold “substantially larger amounts of high-quality capital” and to hold “a buffer of high-quality liquid assets sufficient to meet net liquidity outflows during a period of severe stress”. Also the greenback was lifted by upbeat jobs data released on Wednesday.

Whether the Federal Reserve pulls the trigger on an interest rate hike next month at its final meeting of the year could hinge on how many jobs the US economy created in October. Indonesia’s Jakarta Composite Index fell 0.4 percent while South Korea’s Kospi index weakened 0.2 percent. As a result, many analysts are expecting the euro to hit parity against the dollar over next 12 months.

Spot gold had ticked up 0.5 per cent to US$1,109.10 (RM4,781.38) an ounce by 6.47am, not far from US$1,102.35 hit in the previous session, the lowest since September 11.

Yellen’s remarks caused investors to reset expectations of a December rate increase to above 60 percent.

“The US$1,100 handle is the key figure on the downside whilst a spike back above US$1,110 could signal a technical turnaround or at least a consolidation”, said MKS Group trader James Gardiner. WTI Crude oil declined 03.41% to $46.32 a barrel and Brent was down 4.03% at $48.58 a barrel. USA shares were set to drift lower.