Published: Sat, September 23, 2017
Economy | By Annette Adams

Markets subdued ahead of Fed policy decision

Markets subdued ahead of Fed policy decision

LONDON, Sept 21 (Reuters) - The dollar rose to a two-month high against the yen and extended its gains against the euro on Thursday after a hawkish-sounding Federal Reserve heightened expectations for an interest rate hike in December.

According to investing.com's fed rate monitor more than 70% of traders expect the Federal Reserve to hike rates in December. There was little follow-through from U.S. President Donald Trump's bellicose rhetoric over North Korea on Tuesday.

The loonie was at C$1.2254 per dollar after losing 0.9 percent overnight, when it retreated to a 12-day low of C$1.2338. It also now thinks that the eurozone will grow by 2.1 percent this year, 0.3 percentage point more than its previous prediction in June.

Global stock markets traded in fairly narrow ranges Tuesday as investors paused for breath, a day after USA stock markets struck a record high and geared up for the latest interest rate decision from the U.S.

The S&P 500 lost 0.3 percent, snapping a four-day winning streak, the Dow fell 0.25 percent and Nasdaq dropped 0.5 percent on Thursday as the US equity market braced for a third interest rate hike this year.

ANALYST TAKE: "Details on balance sheet reduction will be of interest, but crucially the committee will extend its rate outlook in 2020, and this could give us a good sense of the end-point for the interest rate in this current tightening cycle", said Chris Beauchamp, chief market analyst at IG.

The dollar index, which tracks the greenback against six major currencies, was down 0.29 percent at 92.238. The kiwi has gained ahead of this weekend's election, which polls show is a tight race.

In Europe, France's CAC 40 was up 0.1 percent at 5,234 while Germany's DAX was 0.1 percent lower at 5,234. US shares were set to be little changed with Dow futures inching up less than 0.1 percent to 22,305. Sony is losing nearly 1 percent, Mitsubishi Electric is declining 0.5 percent and Panasonic is edging down less than 0.1 percent, while Canon is up 0.2 percent. The contract rose 93 cents, or 1.9 percent, to settle at $50.41 a barrel on Wednesday. Japan's Nikkei closed up 0.05 percent and Shanghai added 0.3 percent.

USA crude CLcv1 fell 43 cents to settle at $49.48 a barrel, while Brent LCOcv1 declined 34 cents to settle at $55.14. Fortescue Metals is declining more than 1 percent and BHP Billiton is down 0.2 percent, while Rio Tinto is adding 0.2 percent.

Brent crude rose 66 cents a barrel to $55.80, just shy of a five-month high of $55.99 hit last week.

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