Stocks buoyed by tech bounce; Dudley remarks lift Treasury yields

Comments from Federal Reserve officials so far this week have supported expectations for further interest-rate hikes by the central bank this year, providing a lift to the USA dollar, and dulling gold's investment appeal. In the meantime, global financial conditions remain highly accommodative, the Fed's latest move made sense, and we believe the USA economy will handle this policy transition quite well.

Economists widely expect the bank to keep rates on hold at 1.75 per cent. However, any weakness in USA inflation data going forward would pose a risk for dollar bulls, he added. The Australian dollar edged down 0.1 percent to $0.7574 and the New Zealand dollar was 0.2 percent lower at $0.7228. The measure has been climbing after touching the lowest level since October last week. "Inflation is a little bit lower than what we would like, but we think if the labour market continues to tighten, wages will gradually pick up, and with that, we'll see inflation get back to 2 per cent". This is now the fourth time since 2015 that the Fed has hiked the federal funds' rate, as it adopts an increasingly bullish perspective of United States economic performance. "A revisit of the lows seen in 2016 appears unlikely unless the central bank allows domestic liquidity to surge again", DBS added. Technical analysts say the Aussie may slip to $0.7515/20 if it fails at current levels.

The greenback has also depreciated against other major global currencies this year, including the euro and British pound. "Now that oil is falling, it could add further pressure to the dollar by weakening sentiment toward the USA energy sector".

Dow Jones closed down by 0.24 percent, S&P 500 ended down 0.05 percent, Nasdaq finished the day up by 0.75 percent.

The dollar eased against the other major currencies in subdued trade on Wednesday, as investors awaited the release of US housing sector data due later in the day after comments by Federal Reserve officials sparked uncertainty over future interest rate hikes.

"The potential hikes, including their speed and magnitude, have limited gold's upside risk in our view, and expectations being scaled back bode well for prices later in the year."Elsewhere, palladium XPD= was down 0.3 percent at $858.49 an ounce".

In recent days, the greenback has regained a bit of the ground it had lost against Asian currencies, including the Singdollar, since the start of the year, amid optimism over a seemingly stronger USA economic outlook.

U.S. passenger vehicle sales fell 9.8 percent in May from a year earlier. Brent crude oil and WTI crude oil are hovering around 7-month lows. The group had fallen 3.4 percent over the past two weeks but are up almost 19 percent on the year. The underlying gauge rose 0.8 per cent Monday as tech and health-care shares climbed.

  • Zachary Reyes