Dollar dumped, bonds buoyant on Fed inflation caution

FSMNews

FSMNews

The U.S. central bank maintained funds rates unchanged in its monetary meeting on November 1st and hinted it still meant to raise rates in December, as officials counted "solid" economic growth and a tightening labor market.

The minutes of the Fed's October31-November1 policy meeting showed that Fed policymakers expect that interest rates will have to be raised in the "near term", reinforcing market expectations for the Fed to raise interest rates in December.

US stock markets will be closed Thursday for Thanksgiving Day.

The dollar fell on Wednesday to its lowest level since October against a basket of major currencies, marking its worst one-day performance in five months. For 2018, the Fed is now forecasting three interest rate hikes, but the markets expect two at most.

The minutes, to be published at 2 p.m. EST (1900 GMT), come after outgoing Fed Chair Janet Yellen said rates should rise gradually, but warned she was "very uncertain" that inflation would soon rebound, suggesting a cautious approach to rate increases.

"Investors can be forgiven for wondering why they should buy more USA dollars if we are heading into a "Powell pause" in the first half of 2018", he added, referring to newly appointed Fed Chair Jerome Powell. The dollar also crumbled to 111.27 yen JPY=, near its lowest since September 20. The euro rose to $1.1833 from $1.1819.

On the auctions front, the U.S. Treasury is set to announce the size of two separate bills auctions, and three individual notes auctions.

Commodities were buoyed by the dive in the dollar, with gold up at $1,290.02 an ounce XAU= having added 0.9 percent overnight.

When the markets closed, Dow Jones Industrial Average was at 23526, S&P 500 at 2597 and Nasdaq Composite at 6867.

Silver was up 1 percent at $17.11 an ounce. Oil prices (WTI) increased to USD$58.03 per barrel.

US crude futures CLc1 eased back 12 cents to $57.90 a barrel, after jumping 2 percent on Wednesday to ground last trod in mid-2015.

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