Wall St. higher at open; Fed minutes awaited

Gold held steady on Wednesday, after slipping in the previous session, as investors awaited cues on the U.S.

Financials, the index which will benefit the most from higher interest rates, was off 0.21 percent after four days of gains. It managed to pull away from the 96.797 level plumbed on Monday, its lowest since November 9, when concerns over US politics stemming from the Trump election campaign's suspected links with Russian Federation took a toll on the greenback.

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding nonyielding bullion.

A rise in United States yields also helped push USD/JPY to the 111.80 area with the stronger U.S. currency undermining demand for gold. "It appears that speculative buying of Treasuries has run its course, with Trump concerns and geopolitical risks no longer fresh news", said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

Overseas, the dollar held above 6-1/2-month lows hit in previous days, as comments from a senior Federal Reserve official rekindled expectations of possible USA interest rate rises.

Investors are also awaiting more details regarding the Fed trimming its $4.5 trillion balance sheet, when the central bank releases the minutes at 2 p.m. ET (1600 GMT).

Oanda analyst Craig Erlam said: "Traders have become increasingly convinced that we'll see a rate hike in June, the second this year, but questions are being asked about where the Fed will go from there".

There was brief gold buying following Moody's downgrading of China's credit rating to A1 from Aa3, although the overall impact was limited with a measured tone across asset classes. The dollar gained 0.2% against the Japanese yen but fell 0.4% against both the Mexican peso and Turkish lira. The Australian dollar, sometimes used as a proxy of China-related trades, eased slightly but reaction to the downgrade was also relatively subdued.

The WSJ Dollar index BUXX, -0.05% which looks at the greenback against a wider set of rivals, slipped less than 0.1% to 88.85 early Wednesday. Elsewhere, the Canadian dollar stood steady at C$1.3518 per dollar after touching C$1.3457 overnight, its strongest in a month.

Meanwhile, oil prices were just a touch higher ahead of the OPEC meeting in Vienna on Thursday. [O/R] The pound was almost flat at $1.2965, with the market awaiting further developments in Britain's suspended election campaign after the suicide bombing in Manchester.

  • Zachary Reyes