US Dollar is Eyed Ahead of The Fed Rate Hike Expectations

This morning in Asia, the Asian and Pacific Rim markets were rather mixed as investors eyeing the strength of the US Dollar. They are trying to garner some guidance as the Federal Reserve (Fed) is expected to raise its benchmark rate in December by at least 25 basis points.

In The Down Under, the Australian benchmark, the ASX 200 was down 0.37 percent as the materials sun-index lost some ground. The healthcare sub-index lost 1.73 percent.

Investors are starting to price in a 92 percent, implied, probability that the Federal Open Markets Committee (FOMC), which is the policy arm of the Fed will hike its benchmark lending rate in December. So we saw some profit taking this morning as activities started to unwind in Asia a little bit.

In Japan, the Nikkei 225 lost 0.19 percent as investors were taking cues from the USD/JPY Forex market. The yen was at 108.03 as of 09:00 am GMT time. There is a key support level lining up at ¥108. This market had been trading as high as 107.75 earlier in the session.

Although we saw Japan’s economic growth more than double expectations for the third quarter, yesterday, Donald Trump’s victory in the United States is a game changer for equities and the US Dollar. The USD/JPY hitting ¥110 is now not out of the realm of possibility. However, this Forex market would need a pullback to wind itself up. Two key levels to watch, for now, are at ¥108 and 107.

The US Dollar index, which measures the strength of the sawbuck against a basket of currencies, was a tad bit lower this morning. As of 09:00 am GMT time, this index was 0.37 percent lower near 99.66. Overnight, during the United States trading session, the US Dollar index had hit an 11 month high at 100.11.

Taking a quick look at the commodity universe, and in particular gold, spot gold futures were up a marginal 0.49 percent to $1,227.45 per ounce as of 09:00 am GMT time. During the US trading session the yellow metal hit a five month low at $1,211.08 per ounce. Gold is under pressure from a stronger Dollar as well as strong expectations that the Fed is getting ready to raise rates in December.