US Dollar rises to two-week high as interest rates rise
Washington (Sept 5) The yield on the two-year notes, the most sensitive to the monetary policy outlook, climbed in August by the most since November as the odds of a rate increase this year jumped following Fed Chair Yellen's Aug. 26 remarks.
According to vice chairman Stanley Fischer, the Fed could act as soon as next month.
Kansas City Fed President Esther George last week reiterated her call that higher rates are warranted, while Dallas chief Robert Kaplan said "the case is strengthening" for another increase.
FED FACTOR: U.S. Fed Chair Janet Yellen made comments on Friday that were bullish on the economy but gave no timetable for future rate increases.
European shares responded unfavorably to the rising expectations for a 2016 Fed rate hike, with the pan-European STOXX 600 index last down 0.2 per cent.
"It's hard to move until we see the jobs figures, after Fischer stressed that the August report would be a key factor, and that an interest rate hike could follow good numbers", said Kumiko Ishikawa, senior FX analyst at Gaitame.Com Research Institute in Tokyo.
Market pricing for U.S. interest rate rises had been very weak off the back of global uncertainty and some soft USA data.
Spot gold was little changed at $1,323 per ounce at 0407 GMT.
Fed Chair Janet Yellen said last week that with the USA economy near full employment and inflation showing signs of rising toward the Fed's 2 percent goal, the case for a US interest-rate hike has strengthened in recent months. According to a Reuters poll, the economy probably added 180,000 jobs in August.
At the same time, president of the Swiss National Bank Thomas Jordan has said negative rates are "absolutely necessary" for his country.
Trading was lighter in Europe on Monday, as the United Kingdom markets are closed for a public holiday.
Wells Fargo WFC.N rose 2.5 percent and provided the biggest boost to the S&P, while JPMorgan JPM.N and Bank of America BAC.N rose about 1.1 percent.
Overall, Taylor said the prospect of a rate hike means that mortgage lenders should be getting ready a "much stronger mortgage market" during the fall and winter, seasons that usually slower from a home buying perspective than spring and summer.
"The market is now pricing around a 36 per cent probability of a hike in September and it has moved from about 50 to 60 for December, which is considerably higher than a week ago", said Rabobank's US -focused economist, Philip Marey.
Selling pressures faded in the afternoon as the USA dollar came off its daily highs to trade flat against a basket of world currencies.
US Treasury yields maturing between two to 10 years dipped on foreign demand after touching their highest levels since June on Friday.