Home / International/ Yellen lifts dollar as markets await Trump tax plan

Yellen lifts dollar as markets await Trump tax plan


Comments / {{hitsCtrl.values.hits}} Views / Thursday, 28 September 2017 00:00


London (Reuters): Rising expectations the U.S. Federal Reserve will raise interest rates for the third time this year lifted the dollar on Wednesday and share prices rose as President Donald Trump’s administration prepared to outline a new tax plan.

The dollar touched a one-month high against a basket of currencies and interest rate-sensitive two-year U.S. Treasury yields hit their highest since 2008 after Fed Chair Janet Yellen said on Tuesday it would be “imprudent” to keep rates on hold until U.S. inflation hit 2%.

Ten-year yields rose a hefty five basis points to 2.28%, also pushed higher by the prospect of tax cuts that could increase federal borrowing, analysts said.

Markets are pricing in a 76% chance the Fed will raise borrowing costs in December. Several other senior Fed officials are scheduled to speak on Wednesday.

“Yellen’s comments gave more certainty about another rate hike by the end of the year,” said DZ Bank rates strategist Daniel Lenz.

“Further details of Trump’s tax plans and whether this proceeds smoothly will be of interest – it should be a boost to the economy and mean a generally higher bond yield environment.”

On the eve of its unveiling, Trump said lawmakers should expect a “very, very powerful document” that would cut taxes “tremendously” for the middle class.

If passed, the plan would be Trump’s first significant legislative win since taking office in January.

Anticipation of the long-awaited plan helped lift shares in Asia while a weaker euro pushed European equities higher. A weaker currency is a boon to exporters.

An index of European banks rose 1.2% and miners gained 0.9%, buoyed by the strong dollar, as the pan-European share index rose 0.3%.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.1%, after falling for four successive days to a three-week trough.

Tokyo shares, however, fell 0.3%.

In currency markets, the euro fell 0.4% to a one-month low below $1.1750. The single currency traded close to $1.21 earlier this month but was rattled by Sunday’s German election, which brought the far-right Alternative for Germany (AfD) party into parliament.

The yen fell 0.5% to 112.73 per dollar and sterling fell half a per cent to $1.3385 against the resurgent greenback.

Euro zone government bond yields followed Treasury yields higher. German 10-year benchmark yields rose 3 basis points to 0.44%.

Oil prices were broadly steady after earlier rising on an unexpected drop in U.S. crude inventories and a Turkish threat to block exports from northern Iraq in retaliation for an independence referendum in Iraqi Kurdistan.

Brent crude was last down 12 cents at $58.30 a barrel, having hit a 26-month high of $59.49 on Tuesday.

“Going forward, oil is likely to remain supported as supply disruptions, combined with solid global demand, will probably continue to lift prices,” ANZ said in a research note.

Copper rose for the first day in six as traders closed positions before the quarter-end and a holiday in China. The industrial metal rose 0.9% to $6,471 a ton. Gold dipped 0.1% to $1,292 an ounce.


Share This Article


DISCLAIMER:

1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.

COMMENTS

Today's Columnists

Great ‘Gamperaliya’: A great novel made into a great film by a great director

Saturday, 23 June 2018

‘Gamperaliya’ (Changes in the Village/Changement au Village) was the third feature film made by ace director Lester James Peries. It was released on 20 December 1963.The film was based on the famous novel of the same name written by the doyen of


Thushani takes Todos to new heights

Saturday, 23 June 2018

Thushani Rodrigo has always amazed me. From the very first day I met her, I have been in awe of her strength, courage and grace and constantly impressed by her creativity. The discipline and commitment she brings to her work, her farsightedness and h


Confusion in Maldivian opposition is to Yameen’s advantage

Saturday, 23 June 2018

The ongoing confusion in the ranks of the Maldivian opposition, barely three months before the presidential election, works to the advantage of the incumbent President and candidate of the Progressive Party of the Maldives (PPM), Abdulla Yameen.


Implications of inward FDI on China: Lessons to be learnt

Saturday, 23 June 2018

China overtook the United States to become the largest trading nation in the world in 2014. China is the second largest economy in the world behind the United States and the largest exporter in the world. It is referred to as the factory of the world


Columnists More