Despite the fact that Federal Reserve Chair Janet Yellen expressed uncertainty about U.S. President Donald Trump’s economic policy, she announced on Tuesday that “waiting too long to remove accommodation would be unwise,” which clearly signaled the Fed’s increased likelihood of raising interest rates in March.
She added that “at our upcoming meetings, the committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.”
Wall Street enjoyed another record-setting day on Tuesday following Yellen’s announcement, and Asian stocks piggybacked on the upswing, hitting 19-month peaks during Wednesday’s Asian trading session. MSCI’s broadest index of Asia-Pacific shares outside Japan soared 0.8 percent to highs not seen since July 2015. Australian stocks rose 1 percent as did Hong Kong’s Hang Seng. Japan’s Nikkei 225 index was the clear victor of the day, rising 1.2 percent largely due to the weaker yen.
Currency Markets React to Yellen
The dollar traded slightly higher on Wednesday, hitting 114.380 against the yen after hitting a two-week high on Tuesday. The greenback traded at $1.0575 against the euro. The stronger dollar sent oil prices lower with Brent crude trading down 0.5 percent to $55.68 per barrel and U.S. WTI crude down to $52.89, a 0.6 percent decline. Oil prices were also weighed down by concerns that OPEC would not be able to maintain its commitment to production cuts, despite positive signs since the start of the year. Traders remain concerned that even if OPEC continues to cut production as promised, the 6.5 percent rise in production by the U.S. would keep global supply high, which would prevent prices from as intended.