Dollar Gains for Second Day as Yellen Reinforces December Hike

Dollar Gains for Second Day as Yellen Reinforces December Hike”

"We're now seeing some embryonic prospects of a tax reform in the United States which is a much bigger issue for the markets than the Federal Reserve", said Ray Attrill, Sydney-based global head of forex strategy at National Australia Bank, as quoted by Reuters.

"Another risk is that our framework for understanding inflation dynamics could be misspecified in some fundamental way, perhaps because our econometric models overlook some factor that will restrain inflation in coming years despite solid labor market conditions".

About 20 minutes into trading, the Dow Jones Industrial Average stood at 22,357.82, up 0.3 percent. Apple gained 1.7%, halting a four-session skid.

"Yellen kind of confirmed that they intend to continue to raise interest rates", said Kathy Lien, managing director at BK Asset Management in NY.

Yellen said it was "imprudent to keep monetary policy on hold until inflation is back to 2 percent". Atlanta Fed chair Raphael Bostic talked up the prospect of a December rate hike, while there was some focus on his view that "I actually don't think that our policies are too easy in the sense of really facilitating some sort of asset bubble". Meanwhile, new-home sales tumbled last month, running at a seasonally adjusted annual pace of 560,000.

Should there be an actual conflict this is likely to affect the US Dollar, it could cause a strengthening of the as it's considered a "safe haven" currency.

As the USA dollar rises, gold futures will usually fall, as dollar-priced gold becomes more expensive for holders of other currencies.

Bullion prices ended lower at Comex on Tuesday, 26 September 2017.

Higher rates in the U.S. tend to affect fund flows to emerging markets - a point raised by Reserve Bank governor Lesetja Kganyago last week when he chose to keep local rates on hold. There has been a focus around the response of American football players towards the USA national anthem and more importantly the tensions between North Korea.

Spot gold inched 0.1 percent higher to $1,294.89 per ounce at 0425 GMT.

In the other precious metals, the spot silver price rose $0.048 to $16.835-16.88 per oz.

The U.S. Energy Information Administration will release stocks data later on Wednesday. President Donald Trump has not said whether he plans to re-appoint Yellen or overhaul the central bank's seven-member board of governors. Nymex WTI crude declined 46 cents, or 0.9%, to $51.76 a barrel. Prices on Monday surged 3.1%, with the $52.22 settlement the highest since mid-April. USA crude stocks were reduced by 761,000 barrels last week, the American Petroleum Institute announced on Tuesday. Market expect the EIA to report a fourth-straight weekly riseof 1.3 million barrels for crude inventories, while gasoline stockpiles are seen down by 100,000 barrels and distillates down 2.1 million barrels.

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