Published: Wed, March 20, 2019
Markets | By Otis Pena

Dollar briefly hits upper 111 yen ahead US Federal Reserve's outcome

Dollar briefly hits upper 111 yen ahead US Federal Reserve's outcome

Rate-sensitive bank stocks dipped 0.2 per cent, after jumping more than a full percentage point in value yesterday following confirmation of merger talks between Deutsche Bank and Commerzbank.

That was partly due to its appeal as a safe-haven asset, analysts said, pointing to a Bloomberg report published late on Tuesday that said some US officials expressed concern that China was pushing back against USA demands in trade talks.

Investors are awaiting a U.S. Federal Reserve meeting later in the week.

"China is eager to come to an agreement so I'm not too anxious".

Most currencies remain within well-trodden trading ranges before the Fed decision, as market participants were cautious after taking cues from US data offering new signs the world's top economy is on a path of slower growth.

Australia's S&P/ASX 200 edged 0.1 percent lower to 6,184.80 and South Korea's Kospi inched down less than 0.1 percent to 2,177.62.

Financial markets have gone even further by pricing in a rate cut this year. The Fed's December projection called for two hikes this year, but that is widely expected to be cut to a single increase at the conclusion of the two-day policy meeting on Wednesday.

The central bank's economic projections and Fed Chairman Jerome Powell's subsequent press conference are also likely to be in focus.

The Fed is also expected to lay out a plan to stop shrinking its $4 trillion balance sheet, or so-called quantitative tightening.

"I don't think anyone is expecting a quick resolution to this problem any time soon".

All three major Wall Street indices rose overnight, lifted by the bank and technology sectors, with the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite adding between 0.3 and 0.4 per cent each.

An investor plays a mobile chess game while watching stock prices at a brokerage in Beijing China Tuesday
An investor plays a mobile chess game while watching stock prices at a brokerage in Beijing China Tuesday

With global economic growth appearing to slow, traders were focused on the Fed, which kicks off a two-day policy meeting later in the day, for clues about the likely path of U.S. borrowing costs.

The Japanese yen was flat versus the greenback at 111.43 per dollar.

Despite the Brexit uncertainty weighing on the British economy, the country continues to post sizeable declines in unemployment.

May had earlier warned parliament that if it did not ratify her deal, she would ask to delay Brexit beyond June 30, a step that Brexit's advocates fear would endanger the entire divorce.

Prime Minister Theresa May will request a short delay to Brexit on Wednesday after her failure to get an agreement through parliament, leaving the future of Brexit uncertain.

Palladium was last up 0.92 percent to $1,598.02 an ounce.

The Australian dollar has gained the most from the USA dollar's retreat though it was hit by Reserve Bank of Australia minutes that expressed concern about the housing market.

On the other hand, the EU's chief negotiator, Michel Barnier, has said an extension would only make sense if it increased the chances of May's deal being ratified by Britain's House of Commons.

The U.S. currency, measured against a basket of rivals, has weakened 1.3 percent in the last 10 days.

"The ZEW expectation index has been improving for four consecutive months", said Mizuho's Yamamoto. It gave up 9 cents to close at $59.29 a barrel on Tuesday.

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