Stocks, dollar firm ahead of Fed decision

Stocks, dollar firm ahead of Fed decision

UK’s benchmark FTSE 100 closed down by 0.16 percent, the pan-European FTSEurofirst 300 ended the day up by 0.46 percent, Germany’s Dax ended up by 0.57 percent, France’s CAC finished the day up by 0.42 percent. Against the yen, the dollar was steady on the day at 110.11, while the euro was also unchanged at $1.1210. Traders widely expect the USA central bank to increase rates by a notch, a move that could smother demand for high-yielding emerging market assets.

All eyes were on the United States central bank, which is scheduled to release its rate decision at 1800 GMT on Wednesday with a news conference to follow from Chair Janet Yellen. Super-low unemployment is giving the Fed confidence to lift US rates – gradually – even though inflation remains stubbornly below the Fed’s 2 percent target.

The euro was at $1.1218 from $1.1207.

Among the major exporters, Sony is advancing more than 1 percent, Canon is adding 0.3 percent and Panasonic is edging up less than 0.1 percent.

Mhlanga said the Fed was also expected to adjust its economic projections only marginally and maintain its focus on another interest rate increase later in the year.

But worries over the possible impact of another U.S. hike have lessened, compared with the past, as Indonesia’s economy is widely perceived to have strengthened since the “taper tantrum” of 2013, when Fed moves to cut stimulus battered all emerging markets.

The dollar steadied against its Canadian counterpart after skidding to its lowest levels since late February in the wake of hawkish comments from Bank of Canada Governor Stephen Poloz, who signalled that the BOC could raise interest rates sooner than previously thought. Instead, markets have taken account of recent softness in inflation and lengthened the odds on a further move this year. The Dow rose 0.44 percent, while the S&P 500 gained 0.45 percent and the Nasdaq 0.73 percent.

Yet neither the USA nor the world economy is likely to regain the robust health that prevailed before the recession struck a decade ago. Long-dated yields earlier hit 2.886 percent, their highest since June 1. In the banking sector, Mitsubishi UFJ Financial is higher by 0.3 percent, while Sumitomo Mitsui Financial is down 0.4 percent.

Gold turned slightly higher on Tuesday, as the market awaited signals of future monetary tightening by the U.S. Federal Reserve and a Senate panel’s questioning of Attorney General Jeff Sessions about his dealings with Russian officials.

Gold futures for August delivery on the Comex division of the New York Mercantile Exchange rose 0.23% to $1,271.55 a troy ounce.

Benchmark Brent crude retreated 35 cents to $48.37 a barrel while USA light crude shed 42 cents to $46.04.