Markets

Dollar Inches Up Ahead of Fed Decision

Dollar Inches Up Ahead of Fed Decision

A man looks at an electronic stock quotation board outside a brokerage in Tokyo, Japan February 9, 2018.

Share markets were stuck on their worst run since November on Monday, as caution gripped traders in a week in which the Federal Reserve is likely to raise USA interest rates and perhaps signal as many as three more lie in store this year.

Trade will be top of the agenda at a two-day G20 meeting starting later on Monday in Buenos Aires and any signs of escalating stress between the USA and China could make investors in Asia nervous.

Asian shares fell on Tuesday after investors took profits in high-flying US technology shares on fears of stiffer regulation as Facebook came under fire following reports it allowed improper access to user data. The social media giant took a big hit on Monday, closing with a 6.8% loss, following news that a firm tied to President Donald Trump's 2016 election campaign gathered data from millions of Facebook profiles without authorization. "But if we see retaliation, and significant trade disruptions, it's a different order or magnitude, could begin to affect global growth forecasts", said Andrew Milligan, head of global strategy at Aberdeen Standard Investments.

"The good news is we must recall why the Fed is tightening policy".

The dollar has been stuck in a trading range as investors wait to see whether the Fed will forecast four rate increases this year, instead of the median three seen in December's quarterly forecast. The Federal Open Market Committee will announce its policy decision at 2:00 p.m. ET, while the Fed Chair will hold a press conference at 2:30 p.m. ET.

"The economic situation post-tax cuts also justifies a significant shift upwards in the dot plot", he added, referring to fears the Fed's de facto policy forecast chart will signal four rate rises rather than three because of the effects of USA tax reforms.

Benchmark 10-year notes US10YT=RR last fell 5/32 in price to yield 2.8996 percent, from 2.881 percent late on Tuesday. A healthy US job market and a relatively steady economy have given the Fed the confidence to think the economy can withstand further increases.

Academic behind Facebook breach says he is a 'scapegoat'
The White House said it welcomed inquiries, and that the president believes that Americans' privacy should be protected. Bannon approved spending almost $1 million to acquire data, including Facebook profiles, in 2014, Wylie told the Post.

"Having spent most of this month quietly strengthening (thanks in part to the promise that Australia would be spared U.S. steel and aluminium tariffs) the last three days has seen the AUD come under pressure as investors have considered Australia's exposure to Asian markets in general and China in particular", said Simon Derrick, chief currency strategist at BNY Mellon in London.

Another major overhang for financial markets is the spectre of a global trade war.

Investors are anxious Trump's actions could escalate into a full-blown trade war if China and other countries retaliate with similar or harsher measures, threatening global growth. It is trading at a multi week and multi month high versus many other currencies.

The Aussie AUD=D4 languished near three-month troughs against the dollar of $0.7679 while the Kiwi NZD=D4 hit the lowest since early January.

Kelleher said the dairy auction tonight may also weigh on the New Zealand dollar if milk prices are lower given market expectations for them to be largely unchanged.

US crude CLcv1 rose 1.34 percent to $64.39 per barrel and Brent LCOcv1 was at $68.47, up 1.56 percent on the day.

Copper prices in Shanghai fell to their lowest in nearly six month, their fourth straight day of losses SCFcv1 .