Economy

The dollar is hovering in suspense ahead of the Fed

The dollar is hovering in suspense ahead of the Fed”

The U.S. central bank is expected to release its latest policy statement at 2 p.m. (1800 GMT) after a two-day meeting where investors expected policymakers would decide to embark on a reduction of the Fed's $4.5 trillion balance sheet in October. On Wednesday, the loonie hit a 2-week low at C$1.2390 after the Federal Reserve signaled that it expected to raise interest rates once more by year-end.

"The lack of movement in the dot [plot] signals that the committee is still comfortable that the recent dip in inflation is a blip", said Rob Carnell, Asia head of research at ING, in a note.

"It's sort of interesting when you think about how hawkish the Fed was yesterday".

Yields on the 10-year U.S. Treasury note rose to their highest levels since August 8 on the news.

The kiwi dollar was the largest mover among major currencies on Wednesday, rising to a 1-1/2 month high after a poll showed New Zealand's ruling National Party has a wide lead over the opposition ahead of a general election at the weekend.

CURRENCIES: The dollar rallied against its peers after the Fed statement, rising to a almost two-month high of 112.53 yen from 112.23 yen on Wednesday.

"It's not going to be so significant for the dollar at this stage", said Shaun Osborne, chief currency strategist at Scotiabank in Toronto. Both indexes closed at new record highs as the market extended gains from last week. The Standard & Poor's 500 index inched up 0.1 percent to 2,508.24 and the Dow Jones industrial average rose 0.2 percent to 22,412.59.

Fed members also said that they now project faster growth for 2017, with a median forecast of 2.4 percent gross domestic product growth, versus a June projection of 2.2 percent. While Bain had brought SK Hynix in on the deal, Toshiba did not mention the South Korean chip maker in its announcement, Reuters reported.

Toshiba sank after saying it would sell its memory chip business for around $18 billion, with its United States partner Western Digital vowing to block the deal, which is seen as crucial to the Japanese firm's survival.

Western Digital had put forward a rival bid, and tried to block earlier attempts of a sale, claiming it had the right to more involvement due to its status as a joint venture partner of Toshiba at a manufacturing facility.

Mitsubishi UFJ Financial Group soared 4.0 percent, while Sumitomo Mitsui Financial Group climbed 3.1 percent, and Nomura Holdings rose 2.8 percent. German equivalents, the benchmark for euro zone borrowing costs, fell 1.3 bps to 0.44 percent.

"Investors have a tendency to stay on the sidelines ahead of the Fed and other important events, so that trading becomes more technical", ABN Amro analyst Georgette Boele said.

EUR/USD is likely to find support at 1.1860 levels and now trading at 1.1934 levels.

Currencies showed limited reaction to the Bank of Japan's widely expected decision to stand pat on monetary policy.

She also said if prices rose too quickly the bank would be able to lift rates quicker.



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