Fed's Caution Propels Euro to One-Month High

  • Fed's Caution Propels Euro to One-Month High

Fed's Caution Propels Euro to One-Month High

While U.S. officials actually raised short-term interest rates by a quarter of a percentage point-to a range between 0.75% and 1%-the decision came as no surprise for investors, on the back of earlier statements and positive economic data.

Shares of Tesla rose 2.8 percent to $262.94 after the electric carmaker said it would raise about $1.15 billion as the company speeds up the launch of its Model 3 sedan.

The Fed raised USA rates on Wednesday, as expected, but its earlier forecast of three rate increases this year remained unchanged, disappointing some investors who had hoped for hints of a possible fourth hike in 2017.

BOND YIELDS: U.S. Treasury yields recovered some of their losses from the prior day.

"The story in global markets over the past 24 hours has centered on a broad-based tightening of monetary policy conditions (and the perception of future tightening)", Chris Weston, chief market strategist at IG in Melbourne, wrote in a note.

The MSCI world equity index, which tracks shares in 46 countries, jumped 0.7 per cent on the day to reach an all-time high after the Fed lifted its funds rate by 25 basis points, but said further increases would only be "gradual". Japan's Nikkei 225 fell 0.3 percent, South Korea's Kospi rose 0.7 percent and the Hang Seng in Hon Kong added 0.1 percent.

USA stock indexes took a small step back Thursday, while bond yields recovered some of their sharp losses from Wednesday.

Yesterday, Wall Street scored solid gains and the Nasdaq Composite index hit an all-time high.

The S&P 500 was virtually flat at 2,382, as of 10 a.m.

The Netherlands were in focus amid a closely watched election, where populist, far-right candidate Geert Wilders (http://www.marketwatch.com/story/who-is-the-dutch-trump-geert-wilders-and-should-investors-be-worried-about-him-2017-03-10) is vying to win the most seats in parliament.

The euro EUR=EBS touched its highest level in 5-1/2-weeks on Friday.

April gold GCJ7, +0.22% rose $2.60, or 0.2%, to $1,229.70 an ounce, which marks it highest trading level since early March.

The sterling to United States dollars rate jumped from lows of 1.226 to 1.229 as a effect. Oil prices slipped as support from a weaker dollar was offset by US crude inventories near record high levels.

US crude CLc1 rose 0.25 percent to $48.87 a barrel after losing 0.2 percent on Thursday.

Rate rises lead to higher bond yields, which increase the opportunity cost of holding non-yielding bullion and tend to boost the dollar, in which gold is priced.

James Chen, head of research at Forex.com in Bedminster, New Jersey, also pointed out that the pace of Fed rate hikes and policy outlooks can change extremely quickly.