Currencies steady ahead of Fed statement

Gold prices held firm on Tuesday, but are still close to their lowest level for nearly three weeks as the dollar shed some gains and with investors anticipating the Federal Reserve’s policy meeting later in the day. Any new recession or economic shock would interrupt the normalization plans on top of gradual rate hikes. After leaving its benchmark rate at a record low for seven years after the 2008 crisis, the Fed has modestly raised the rate four times since December 2015 to a still-low range of 1 percent to 1.25 percent.

Best Buy fell more than 8 percent after the No.1 US electronics retailer forecast 2021 adjusted earnings well below Wall Street estimates.

Adobe fell 4 percent after the Photoshop maker’s revenue forecast came in line with estimates. Benchmark 10-year notes fell 9/32 in price to yield 2.27 percent, after yields got as far as 2.29 percent, the highest since August 8.

The Dow is up 2,649.99 points, or 13.4 percent. But while most economists see a clear link between low rates and record high stock markets the extent to which QE contributed to the fall in the unemployment rate is more controversial, and likely to remain so.

“A number of them are underwater so they’re already in a losing mode”, he said, adding that if gold slips much more “that would add a significant number of very weak longs in the market”. Income-seeking investors find those stocks less appealing when bond yields move higher.

But over the long run, the plan will put upward pressure on consumer interest rates, including for auto loans and mortgages.

-The Bloomberg Dollar Spot index surged 0.5 percent.

One short-term effect of the hurricanes will be higher gasoline prices, which “will likely boost inflation temporarily”, the Fed said.

The 10-year yield on Monday touched a almost three-year high at 2.119 per cent. But other indexes in the region fell, with South Korea’s Kospi slipping 0.2 percent to 2,407.39. The euro was little-changed at $1.1944.

Over the longer run, officials now see the rate target at 2.8%, rather than 3%, with the current rate rise campaign largely complete by 2020.

On the energy front, oil prices rose after declining slightly overnight. Technology and financial companies were down the most.

In other precious metals, silver was up 0.2 percent at $17.35 an ounce, platinum gained 0.3 percent to $950.90 and palladium was down 0.1 percent at $908. Benchmark 10-year notes last fell 5/32 in price to yield 2.2463 percent, up from 2.23 percent late on Monday.

“Hurricanes Harvey, Irma and Maria have devastated many communities, inflicting severe hardship”, Fed officials said in a policy statement Wednesday after their two-day meeting.

The Fed says in its latest quarterly economic projections that economic growth should reach 2.4 percent this year, up from a June forecast of 2.2 percent.

The dollar steadied after sliding against a basket of currencies overnight, with the dollar index standing at 91.844 at 8:11 a.m. HK/SIN.

The dollar index, which measures the greenback against six major peers, increased 0.83 per cent at 92.558 in late trading.