An index that measures the dollar against six bonds added as much as 0.6 percent in early London trading to hit its highest level since 2002. The pound fell 0.4 percent to $1.133 and the euro lost 0. 7 percent to consolidate below par at $0.99. MSCI’s index of emerging market currencies fell 0.2%. The dollar is widely seen as a safe haven currency in times of geopolitical tension and economic stress. “The dollar has maintained good momentum so far this week, benefiting largely from safe-haven demand as the risk climate remained quite fragile,” said Francesco Pesole, FX strategist at ING, the Dutch bank. The Japanese yen, which often rises as domestic investors bring capital home during periods of market turmoil, rose 0.3 percent on Wednesday to ¥143.33 against the dollar. Victoria Scholar, chief investment officer at fund supermarket Interactive Investor, said Putin’s speech had “fueled safe-haven demand” for the yen. “The yen is failing to function as a standard safe-haven asset amid this year’s global economic uncertainty due to widening interest rate differentials between Japan and other economies that have favored currencies such as the US dollar,” Scholar said. He added that a combination of haven demand and an expected Fed rate hike drove demand for the dollar against most major currencies. “The dollar is rising more aggressively against the euro than the pound as the Bank of England on Thursday is expected to follow the Fed with a similarly aggressive rate hike. The dollar’s post-Fed interest rate differential charm is likely to last only a day against the pound if we see similar [0.75 percentage point] hike from the Bank of England’. Stock traders in Europe braced for a choppy session after losses in the US on Tuesday were followed by a broad retreat in Asian shares. The FTSE 100 was up 0.6 percent by mid-morning in London, while the regional Stoxx Europe 600 index was down 0.3 percent after opening lower. Hong Kong’s Hang Seng fell 1.8 percent. Japan’s Topix lost 1.4%, China’s CSI 300 fell 0.7% and South Korea’s Kospi lost 0.9%. Before the start of trading on Wall Street, U.S. futures showed a gain of about 0.6 percent for the S&P 500. On Tuesday, the S&P closed 1.1 percent lower in a decline that sent all key sectors of the stock market back during the day. Big moves in U.S. Treasury yields weighed on stocks ahead of the Federal Reserve’s final meeting on Wednesday, which is expected to deliver a third straight hike of 0.75 percentage points. The yield on the 10-year U.S. Treasury note hit an 11-year high of 3.6 percent on Tuesday, while the yield on the policy-sensitive two-year note hit a 15-year high of 3.99 percent. Both yields fell on Wednesday, with the 10-year losing 0.03 percentage points to 3.55%. Bond yields rise as bond prices fall. Investors will pay close attention to updated interest rate forecasts from Fed officials — known as the “dot plot.” The new set of forecasts, the first since June, will also include officials’ estimates of inflation, unemployment and growth. John Velis, chief currency strategist for the Americas at BNY Mellon, said he expects the Fed to raise interest rates by as much as 5 percent early next year, above the 4 percent cap currently quoted per market. The Fed’s new projections would likely involve “a sustained period of high interest rates” rather than a quick “turn” to monetary easing early next year, Velis said.
