Aurelia Butler

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    Yen worries increase as dollar strengthens after Fed

    TOKYO (Reuters) – The dollar hit fresh peaks on Thursday, sitting around its highest against the yen since November after a hawkish pause by the U.S. Federal Reserve.Sterling, meanwhile, sank to fresh multi-month lows in the wake of an inflation report that surprised to the downside on Wednesday, as questions ramp up about whether the Bank of England may follow its U.S. peer in holding rates on Thursday.The Fed met market expectations at its monetary policy meeting on Wednesday, holding interest rates steady at the 5.25% – 5.50% range.The U.S. central bank, however, stiffened a hawkish monetary policy stance that its officials increasingly believe can succeed in lowering inflation without wrecking the economy or leading to large job losses.The dollar index, which measures the currency against a basket of rivals, rose as high as 105.59 on Thursday, its strongest since March 9.The index climbed for its ninth straight week last week, its longest winning streak in nearly a decade as resilient U.S. growth fueled a rebound in the dollar.The Fed’s benchmark overnight interest rate may still be lifted one more time this year to a peak 5.50%-5.75% range, according to updated quarterly projections released by the U.S. central bank, and rates kept significantly tighter through 2024 than previously expected.The Japanese yen was feeling the heat after the Fed meeting, hovering around 148.39 per dollar and just off a fresh low of 148.47, its weakest since November.Even as dollar/yen slips back toward levels seen at the end of last year, the possibility of the Bank of Japan tightening policy at Friday’s meeting remains slim.”We doubt Governor Ueda will provide strong guidance on monetary policy until he has gathered sufficient evidence of a virtuous wage‑price cycle,” said Carol Kong, economist and currency strategist at Commonwealth Bank of Australia (OTC:CMWAY), in a note.An absence of change at the BOJ’s meeting on Friday could push the dollar/yen to rise higher, she added.”Together with Japanese officials’ warnings, the risk of a FX intervention by the BOJ continues to rise in our view.”Sterling was last trading at $1.2311, down over 0.2% in the Asian morning and at a fresh multi-month low against the greenback ahead of the Bank of England’s rate decision later on Thursday.Britain’s high inflation rate unexpectedly slowed in August, official data showed on Wednesday, raising questions about how much higher the central bank will take interest rates a day before its next policy announcement.While the CPI report was “a rare piece of good news” for the UK economy, the National Australia Bank (OTC:NABZY) said in a note that the data may complicate the BOE’s decision.”After stubbornly high average earnings data last week, a stronger inflation report would have made life a little easier for the BOE in delivering a potentially final 25bps rate hike this week.”Market participants had leaned heavily toward the BOE hiking rates again on Thursday for what would be the 15th time, but expectations quickly shifted following the data.The euro was last down over 0.2% at $1.0632. More

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    US two-year Treasury yield rises to 17-year high on hawkish Fed

    TOKYO (Reuters) -The yield on two-year U.S. Treasury notes rose to a 17-year high of 5.1970% on Thursday, a day after the Federal Reserve held interest rates steady but stiffened its hawkish stance for future policy.The 10-year yield rose to 4.4310%, a new 16-year peak.The U.S. central bank projected a further rate increase by the end of the year and expected monetary policy to be significantly tighter through 2024 than previously thought.Fed Chair Jerome Powell’s “cautious view that a ‘soft landing’ is not even the base case may reflect the uncertainties of policy lag, especially alongside the possible need for more tightening,” Mizuho analysts wrote in a client note.”Against this backdrop the case for higher front-end yields, with distinct upside bias to yield volatility may persist into Q3 and early Q4,” ahead of the next policy meeting in November, they wrote.Money market traders now see better than 50% odds of a quarter-point hike by year-end, from around 40% probability before the Fed decision. More

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    McCarthy says US House Republicans to vote on defense spending bill Thursday

    (Reuters) -U.S. House of Representatives Speaker Kevin McCarthy said Republicans will try again to move forward on fiscal 2024 spending legislation on Thursday, with a procedural vote on a defense appropriations bill.After a 2-1/2 hour closed-door meeting with members of his Republican majority, the California Republican also said lawmakers were “very close” to agreement on a short-term stopgap measure to avert a government shutdown on Sept. 30.He said House Republicans would also begin advancing other full-scale appropriations bills. “We’re going to be voting tomorrow,” McCarthy told reporters. “I think we made tremendous progress,” he added. “I think we’ve got a plan to move forward.”His comments provided a rare sign of progress a day after House Republicans were unable to advance the defense bill and the short-term measure, known as a continuing resolution or “CR” due to Republican infighting. The stalemate raised concerns about the ability of Congress to keep federal agencies afloat, when the 2024 fiscal year begins on Oct. 1.The House and the Democratic-led Senate have barely a week and a half to pass a CR or long-term spending legislation that Democratic President Joe Biden can sign into law. On Tuesday, opposition from five Republicans defeated a vote intended to open debate on a $886 billion defense spending bill. Those five Republicans were hardliners who wanted assurances that fiscal 2024 appropriations will not exceed a 2022 top line of $1.47 trillion – $120 billion less than McCarthy and Biden agreed to in May. McCarthy said on Wednesday he had been able to persuade two of the five to change their positions.But discussions among Republicans have yet to reach a breakthrough on a proposed CR that would keep the government open until Oct 31 while cutting spending and imposing restrictions on U.S. immigration and border policy. More