Dollar rises on U.S. fiscal hopes, hawkish Yellen

Posted September 28, 2017

US stocks crept higher as Janet Yellen warned that the Federal Reserve should be wary of tightening monetary policy too gradually. The Euro remained under a bit of pressure but EUR/USD was above the 5-week low hit Tuesday when investors anxious about more fractured European politics in the wake of Germany's election.

The dollar index, which tracks the greenback against six major currencies, was up 0.54 percent at 93.469, after rising to 93.607, the highest since August 23.

Despite efforts from British Prime Minister Theresa May to the contrary, the U.S. Commerce Department slapped import duties of 220 percent on Bombardier Inc.'s new jetliner.

The Republican tax plan being released Wednesday will open the door to a top individual tax rate that is higher than the 35% that has been in previous plans, according to people familiar with the discussions.

President Donald Trump and Republican leaders are proposing a cut in the top corporate tax rate to 20% from its current 35%, repealing the estate tax and eliminating state and local tax deduction as part of a sweeping overhaul of the US tax code.

US Treasury yields rose on Tuesday ahead of a speech by Federal Reserve Chair Janet Yellen and a $26 billion sale of two-year notes, which kicks off this week's $88 billion short- and medium-dated government debt supply.

U.S. WTI futures were up 0.50 percent to $52.14 per barrel and Brent crude futures were up 0.34 percent to $58.64.

Evans' view appears to be in the minority at the Fed, where decisions on the appropriate level of interest rates are made every six weeks or so. President Donald Trump has not said whether he plans to re-appoint Yellen or overhaul the central bank's seven-member board of governors.

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There has been optimism that the third forecast interest rate hike in the United States will go ahead in December and Yellen looks set to deliver her verdict.

-The S&P 500 was little changed at 2,496.84, the Nasdaq 100 Index added 0.2 percent and the small cap Russell 2000 Index gained 0.3 percent to reach a record high.

"But we should also be wary of moving too gradually.without further modest increases in the federal funds rate over time, there is a risk that the labor market could eventually become overheated, potentially creating an inflationary problem down the road that might be hard to overcome without triggering a recession".

-U.S. data on durable-goods orders, GDP and personal spending later in the week will provide further clues as to the Fed's policy path.

MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.1 percent.

Compared to the Japanese Yen, the dollar climbed 0.4 percent to 112.19 yen.

-The euro sank 0.5 percent to $1.1792, the weakest in five weeks.