Dollar Hits Speed Bump in Fed-Driven Rally; Bonds Stem Declines
The dollar’s advance stalled as the dust settled on a new financial-market landscape created by the Federal Reserve’s shift to a tighter policy path in 2017. The greenback fell against the euro after touching the highest since 2003 on Thursday while stocks rose. Treasuries stemmed six days of declines underpinned by the Fed’s more hawkish outlook for interest-rate increases next year. Gold trimmed its sixth weekly drop, and copper fell.
Sterling trades close to three-week low vs. surging dollar
Sterling traded close to a three-week low against the dollar on Friday and was on track for a second week of losses, weakened by the greenback’s sharp rise on expectations for a faster-than-anticipated increase in U.S. interest rates. The U.S. currency soared to 14-year highs against a basket of currencies this week after the Federal Reserve on Wednesday hinted that rates could rise three times over the course of next year – up from a forecast of two hikes at the Fed’s September meeting. Sterling – already weaken because of Brexit concerns – skidded along with other currencies, hitting a trough of $1.2378 on Thursday, its weakest since Nov. 23, and closing the day more than 1 percent down – its weakest performance in two months. On Friday it traded flat at $1.2425.
China’s money rates spike this week, but injection eases pressure
Money rates in China surged as interbank liquidity became increasingly tight over the course of the week, but the pressure eased slightly on Friday after the central bank injected cash via medium-term lending facilities, traders said. The volume-weighted average rate of the benchmark seven-day repo traded in the interbank market, considered the best indicator of general liquidity in China, was 2.6335
percent, 25.42 basis points higher than the previous week’s closing average rate. The seven-day Shanghai Interbank Offered Rate (SHIBOR) rose to 2.5190 percent, 2.62 basis points higher than the previous week’s close. The overnight rate surged to the highest level in 19 months on Friday.