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Thursday, December 15, 2016

US DOLLAR EXCHANGE RATE NEARING P50, KSA RIYAL NEAR P13.50

Dollar surges and Asian market take a hit as Federal Reserve raise interest rates. US dollar against Philippine peso went to as high as P49.92, few points away before it reaches P50.


Dollar surges and Asian market take a hit as Federal Reserve raise interest rates. US dollar against Philippine peso went to as high as P49.92, few points away before it reaches P50.

The U.S. dollar was sharply higher in early Asia trading, with the yen hardest hit after the U.S. Federal Reserve announced its first interest-rate increase of 2016 and signaled it expects to increase rates more quickly than previously anticipated in 2017. Marketwatch reports that 
Fed officials said they would increase the federal-funds rate by a quarter percentage point to between 0.50% and 0.75%, a move consistent with a brightening economic outlook.
The Fed now expects the median fed-funds rate to be 1.4% by the end of 2017, reaching 2.1% at the end of 2018 and 2.9% in 2019. That implies three quarter-percentage-point interest-rate increases over each of the next three years, a faster pace than officials projected in September, when they only saw two rate increases next year.
Currency traders said the full extent of the reaction to the Fed rate increase won’t be known until European markets have had time to absorb the news.
The reaction in currency markets in early Asia has seen the U.S. dollar jump to its highest levels since February against the yen, with broad gains also posted against the euro and dollar bloc currencies.
The U.S. dollar climbed above 117.0 yen USDJPY, +0.30%   after trading closer to 115.0 yen ahead of the Fed announcement. WSJ Dollar Index BUXX, +0.16%   is up 0.8% to 91.12, which would mark its highest closing value in more than 14 years. The Australian, Canadian and New Zealand dollars were sharply lower against the greenback.
Richard Grace, the global head of currency strategy at the Commonwealth Bank of Australia, said the Fed is navigating its way through some tricky waters. Fed Chairwoman Janet Yellen has acknowledged the potential for stronger GDP growth if big infrastructure spending by the Trump White House occurs, while also acknowledging monetary conditions have tightened in the past month through a higher U.S. dollar and big increases in U.S. bond yields, he said.

“We were certainly surprised by the Fed move,” said Tim Condon, head of research for Asia at ING. “There was a risk [of a hawkish Fed] that did materialize.” Condon added that a stronger dollar and the selloff in the S&P 500 threatens to “be the most contagious” for Asian markets, excluding Japan.
Overnight, the Federal Reserve raised the federal-funds rate by a quarter of a percentage point to between 0.50% and 0.75%, and said it expected to raise short-term rates next year by another 0.75 percentage points, spread over three rate increases.

©2016 THOUGHTSKOTO