United States dollar jumps on Fed jolt as Trump speech looms

Federal Reserve Chair Janet Yellen said Friday another interest rate increase could be “appropriate” later this month if U.S. employment and inflation remain in line with expectations.

Yellen’s speech comes after several other Fed officials this week painted an upbeat picture of the United States economy, stoking market expectations for a March rate hike.

These factors, as well as Wednesday’s news that the latest United States manufacturing PMI from ISM had impressed with a figure of 57.7 in February, led to March Fed rate hike bets jumping from 30% to nearly 70% this week alone.

Rising U.S. interest rates increase the opportunity cost of holding non-yielding gold, while boosting the dollar.

The market will closely scrutinise Yellen’s speech as to clues on a probable rate hike.

“There’s a certain caution in advance of her speaking”.

The only possible adverse development between now and the Fed meeting, at least from an economic data point of view, would be if the February US labor market report disappoints significantly next Friday. At 13:06 a.m. ET (1806 GMT), the Dow Jones Industrial Average was up 4.11 points, or 0.02 percent, at 21,007.08, the S&P 500 was down 0.38 points, or 0.01 percent, at 2,381.54 and the Nasdaq Composite was up 1.75 points, or 0.03 percent, at 5,862.97.

The Australian dollar sagged on weaker-than-expected trade data, dipping 0.3 percent to $0.7654.

“Animal spirits have been unleashed” on the stock market after the election of Donald Trump as US president, Dudley told CNN, referring to the record-breaking numbers the USA financial markets have experienced in recent months. As for bonds, the yield on the 10-year Treasury, which trades inversely to prices, was little changed at 2.48%, though it has been on a gradual incline so far this year. Yields touched 2.507 percent during European trading, the highest since February 15.

The dollar index, which measures the greenback against six major peers, was up 0.54 percent to 101.670 in late trading.

LONDON, March 3 The dollar stalled after two days of strong gains on Friday, with nerves around a speech by Federal Reserve chief Janet Yellen due later in the day adding to factors that have held back a broader rally this year.

“If that’s the case, they stop reinvesting the coupons and maturities into the long end of the yield curve which would place some upward pressure on long bond yields in the U.S.”, said Richard Grace, chief currency and rates strategist at Commonwealth Bank. “It’s always been clear that the odds of Le Pen becoming the next president were quite low and now we see confirmation of that in the polls”.

The stronger dollar troubled commodity prices on assets linked to the dollar.

Rig builder Keppel Corporation shed 0.7% to S$7.17, weighed under an overnight decline of over 2% in Brent crude prices.

United States crude retreated 0.1 per cent to US$53.93 a barrel.