© Reuters. FILE PHOTO: U.S. dollar notes to see the figure in this image
By Richard Leong
NEW YORK (Reuters) — The dollar rose broadly on Wednesday, a two-month strike high against the yen as the Federal Reserve signaled it may the interest rates for the third time this year, even as inflation remained below the 2 percent target.
The U.S. Central Bank said after a two-day meeting, it is the reduction of the Fed’s $4.5 trillion balance sheet in October to start to run by small quantities of Treasuries and mortgage-backed securities. [nFOMKKEDCA]
«Currently, the market is the Fed looks more radical than expected,» said Tim Old, Director of currencies and prices of Aviva (LON:AV) investors.
Some traders had thought to catastrophic damage from hurricane Harvey and Irma in Texas and Florida force could the Fed move to increase interest rates until next year.
The Fed has raised interest rates by a quarter point in March and June, and the current target area is now at 1.00 to 1.25 per cent.
«The Fed has not the age of this time on the market outlook. This time the market adjusted to the Fed outlook,» said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management co.
The futures market implied dealer, saw a 73 percent chance that the Fed will raise interest rates at its Dec. 12-13 meeting , from 52 percent before the Fed showed the latest explanation and prediction, the CME Group FedWatch tool.
The dollar index, which tracks the greenback against six major currencies, was modestly lower before higher on the Fed’s forecast for a further interest rate increase in 2017. It was up 0.7 percent for its biggest one-day rise since Aug. 4 92.426.
The euro slipped by 0.8 per cent to $1.1894, the lowest in four sessions, while the greenback 0.5 percent, won at 112.17 yen, after touching a two-month high of 112.51 yen, Reuters data showed.
Among the emerging market currencies, the Mexican peso rebounded from Tuesday’s losses, inspired by the second deadly earthquake to strike the country in two weeks.
The Mexican currency ended 0.2 percent to 17.76 pesos per dollar , is the reverse of the previous day fell by 0.2 percent.
The new Zealand dollar gained 0.6 percent to $0.7360 after reaching the highest level in 6-1/2 weeks, as a survey showed, the National party moved ahead of the rival Labour party ahead of a parliamentary election this weekend.
Support for the National party jumped 6 points to 46 percent, according to A News-Colmar Brunton poll, while support for the opposition Labour party slumped by seven points to 37 percent.