US Fed announces plan of $4.5 trln balance sheet reduction

US Fed announces plan of $4.5 trln balance sheet reduction

US Fed announces plan of $4.5 trln balance sheet reduction

The index had hit an intraday low of 7,268.03.

The U.S. central bank also said it would start to reduce its $4.2 trillion worth of bond holdings that ballooned through three rounds of quantitative easing.

The Fed had announced previously that it meant to gradually minimize its portfolio of bonds and other assets, acquired during the financial crisis.

The euro climbed half a percent to $1.1992 and was also up 0.1 percent for the week, with traders not seeing Sunday's German elections as a risk.

GBP/USD is supported in the range of 1.3375 levels and now trading at 1.3493 levels.

Advertisment Most major indexes in Asia closed lower on Thursday after the USA dollar and Treasury yields spiked following big news out of the Federal Reserve.

Both the Dow and S&P 500 fell following the Fed statement but reversed those losses to end the session slightly higher and add to a string of closing records.

Gold prices are down 0.7% trading at $1,300 an ounce. Financial markets were barely moved by the Fed decision and the new economic projections and based on the immediate market reaction it looked as if the Fed was right when it said that the portfolio runoff would be as exciting as "watching paint dry". Policymakers from the Bank have reinforced that message in subsequent comments. It has made session high at 1.2388 and lows at 1.2191 levels.

Though inflation remains stubbornly below the Fed's 2- percent target rate, a recent data showed uptick in domestic consumer prices, which raised the chances of a December rate hike by more than 50 percent.

THE FED: Investors were looking ahead to the two-day policy meeting of the U.S. Federal Reserve which begins Tuesday. They earlier pared gains after data showed a bigger-than-expected build in USA crude inventories.

The central bank said Hurricanes Harvey, Irma, and Maris were expected to affect U.S. economy in the near term, while they would not alter the course of the economy in the medium term.

If the Fed discloses date of reducing its balance, then the sharp increase in the U.S. dollar rate may occur. The currency traded in a range of C$1.2236 to C$1.2302.

Analysts widely believed that inflation developments will determine the timing of next rate hike.

The dollar index, which tracks the greenback against six major currencies, was modestly lower before turning higher on the Fed's forecast for one more rate hike in 2017. That should shed almost $300 billion in bonds over the first 12 months, and almost $500 billion over the second, according to analysts' projections.

"A lot of people were thinking (the Fed) would pass in December", Silvia said.

The dollar was 0.4 per cent higher at 112.640 yen, its highest since July 18.

The key outside markets on Thursday morning see the USA dollar index slightly weaker after Wednesday's strong gains. As a result, financial markets have seemed unsure about whether the Fed would raise rates again before year's end.

ASIA'S DAY: Japan's Nikkei 225 added 0.1 percent to 20,310.46 and South Korea's Kospi edged down 0.2 percent to 2,412.20. The yield on Germany's 10-year government, the benchmark for the region, was 4 basis points higher at 0.47 per cent, its highest since early August.

The S&P 500 lost 0.3 percent, snapping a four-day winning streak, the Dow fell 0.25 percent and Nasdaq dropped 0.5 percent on Thursday as the US equity market braced for a third interest rate hike this year. The two have met just once, for about 15 minutes, in the Oval Office in February.

Brent crude futures rose $1.15, or 2.1 percent, to settle at $56.29 a barrel, while USA crude futures gained 93 cents, or 1.9 percent, to settle at $50.41.

The dollar index, which tracks the US unit against a basket of six major rivals, fell 0.3 percent to 92.024, but it was still slightly higher on the week and was well above its more than 2-1/2 year trough of 91.011 marked on September 8. Benchmark U.S. crude shed 51 cents to trade at $50.18 a barrel in electronic trading on the New York Mercantile Exchange, while Brent crude, used to price worldwide oils, dropped 43 cents to $56.86 a barrel in London.

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