Stocks march on as Fed rate hike looms, dollar steady

The Federal Reserve is set to raise short-term interest rates Wednesday for the third time in six months - a vote of confidence in the American economy and especially in the resilience of the US job market.

"The main focus this week will be on the Fed's balance sheet policy", said Michelle Girard, chief US economist at RBS.

The S&P 500 technology sector rebounded 0.9 percent, following its biggest two-day decline in almost a year. It was little changed on the Japanese yen at 110.06 and the euro at $1.1213. There was some uncertainty whether the Chinese central bank would move to raise rates if the Federal Reserve sanctions a further increase in interest rates. The Canadian dollar strengthened to hit two months high against its US counterpart on Tuesday as comments by Bank of Canada Governor Stephen Poloz supported the view that the central bank could raise interest rates sooner than previously thought.

Against a basket of currencies, the dollar barely budged at 96.978.

The U.S. dollar fell as far as C$1.3209, its lowest since February 28, having shed two cents in as many days.

The dollar drifted in recent ranges in the calm before a forecast Federal Reserve storm, as investors awaited signals later in the global session on the Fed's policy outlook.

A recovery in tech stocks and fresh optimism over troubled Italians banks lifted European shares from seven-week lows on Tuesday.

UK's benchmark FTSE 100 closed down by 0.16 percent, the pan-European FTSEurofirst 300 ended the day up by 0.46 percent, Germany's Dax ended up by 0.57 percent, France's CAC finished the day up by 0.42 percent. Stocks on Wall Streets hit a record high overnight. The Dow rose 0.44 percent, while the S&P 500 gained 0.45 percent and the Nasdaq 0.73 percent.

This leaves the market vulnerable to any hawkish spin from the Fed, which would likely slug Treasury prices while lifting the embattled US dollar.

Ahead of the Fed announcement tomorrow morning New Zealand time, Statistics New Zealand releases balance of payments data for the first quarter today, which is expected to show the current account deficit unchanged at 2.7 per cent of gross domestic product.

USA gold futures for August delivery settled down $0.3, or 0.02 percent, at $1,268.60.

Brent crude traded $48.32 a barrel on Tuesday, down 0.82 percent, while US crude was around $45.96 a barrel, down 1.08 percent.

Oil prices edged higher on Tuesday after OPEC detailed supply cuts around the world, but the cartel also said overall production rose in May, and crude stayed well below $50 a barrel despite the modest recovery.

  • Zachary Reyes