Commodities - Gold Prices Tumble to 4-Week Lows as US Dollar Strengthens

Xavier Trudeau
Septembre 23, 2017

The dollar was trading near a two-month high against Japan's yen on Thursday, after the US Federal Reserve indicated that it was on track to start paring back its massive bond-buying programme next month.

The main trend for stock index futures is higher.

Fed boss Janet Yellen said the world's biggest economy was "performing well" while it emerged after a closely watched meeting that most members of the policy board wanted to lift borrowing costs by December. Australia's S&P/ASX 200 fell 0.7 percent to 5,668.90.

The long term fundamentals for futures are mixed. Fortescue Metals is declining more than 1 percent and BHP Billiton is down 0.2 percent, while Rio Tinto is adding 0.2 percent.

Gold prices are up around 11% this year. Evolution Mining and Newcrest Mining are losing almost 3 percent each.

The broader Topix gained 1.8 percent to hit a fresh two-year closing high of 1,667.88.

Dow Jones closed up by 0.17 percent, S&P 500 ended up 0.05 percent, Nasdaq finished the day up by 0.09 percent. The 10-year Treasury yield approached 2.30 percent.

Japanese carmakers were lifted by the weaker yen, with Toyota rising almost 4 percent and Nissan up 2.12 percent.

The Chinese yuan lost 0.29 percent against the US dollar to 6.5890.

WALL STREET: Major U.S. benchmarks finished mostly higher.

As expected, the Fed left interest rates unchanged at the conclusion of its two-day policy meeting on Wednesday.

The single currency also hit its highest level against the Swiss franc since Jan. 15, 2015, when the Swiss central bank dropped the franc's cap against the euro.

"Right now, the market sees the Fed more hawkish than anticipated", said Tim Alt, director of currencies and rates at Aviva Investors.

In India, a new report found that there is a "time bomb" in the country's widely-cheered demographic dividend.

In Greater China, stocks were also pointing higher. Kia Motors declined 2.4% and Posco lost 2.6%.

Currency traders should continue to focus on interest rate differentials, as it will remain the primary driver of FX markets.

The US Fed on Wednesday announced that it would start to wind down its $4.5 trillion balance sheet in October. The FTSE 100 index of leading British shares rose 0.4 percent to 7,278.

The MSCI which is the broadest index of Asia-Pacific shares outside Japan was steady at 0.05% while the Hang Seng index in Hong Kong added 0.2%.

All of the Topix's 33 subsectors were in the positive territory, with financial stocks and exporters outperforming as risk appetite recovered.

The relatively hawkish statement and unchanged interest rates projections for 2017 and 2018, have forced market participants to adjust their expectations for an interest rate hike in December 2017, from a chance of 50% to above 70%.

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