Dollar Strengthens as Gold Declines Before Fed Decision 

The dollar gained against most major currencies and gold fell for a third day before the Federal Reserve decides monetary policy. The ruble strengthened for a fourth day and Russian stocks fell as the nation pushed on with the annexation of Crimea.

The U.S. currency strengthened against 11 of its 16 major peers at 8:05 a.m. in New York, rising 0.1 percent against the yen and the euro. The Stoxx Europe 600 Index rose 0.2 percent while Standard & Poor’s 500 Index futures added 0.1 percent after the gauge closed within 0.3 percent of a record. Russia’s Micex Index of equities lost 0.8 percent. The pound advanced after the Bank of England said there’s a risk of further gains. Gold dropped 1 percent.

The Fed will press on with cuts to its bond buying program and switch to qualitative guidance for assessing interest rates, according to economists surveyed by Bloomberg before the Fed’s Open Market Committee two-day meeting ends today. The ruble climbed a fourth day as President Vladimir Putin made the annexation of Crimea official. The U.K. unemployment rate held steady in the three months through January near an almost five-year low, data today showed.

“The market would be unwilling to be too aggressive position wise ahead of the FOMC,” said Neil Mellor, a currency strategist at Bank of New York Mellon in London. “That’s the biggest potential catalyst of the day. If there’s no tapering, and it clearly is the presumption in the market that it will go ahead as planned, then will be a big negative for the dollar.”

Forward Guidance

Benchmark 10-year Treasury yields were little changed at 2.67 percent. The dollar rose 0.1 percent to 101.53 yen after falling 0.3 percent yesterday. The U.S. currency gained 0.1 percent to $1.3926 per euro. The euro traded at 141.36 yen.

The Fed will further scale back asset purchases today, reducing purchases by $10 billion for the third time, according to economists surveyed by Bloomberg March 14-17. Policy makers will scrap a 6.5 percent unemployment-rate target in favor of a range of economic indicators, 76 percent of the economists said.

Fed officials have said they will probably hold the central bank’s target interest rate near zero “well past the time” that unemployment falls below 6.5 percent, “especially if projected inflation” remains below its longer-run goal of 2 percent.

The Stoxx Europe 600 added 0.2 percent after it jumped 1.8 percent in the past two days, rebounding from its biggest weekly loss since January. The number of shares changing hands today in Stoxx 600-listed companies was almost 45 percent greater than the 30-day average, according to data compiled by Bloomberg.

Inditex Openings

Bayerische Motoren Werke AG advanced 7.4 percent after the world’s biggest maker of luxury autos forecast “significant” gains in 2014 profit. Inditex SA (ITX) gained 3.8 percent after the Spanish owner of the Zara clothing chain reported rising revenue in the first six weeks of the fiscal year and said it will start online sales in more markets. Aurubis AG climbed 4.3 percent after Goldman Sachs Group Inc. recommended buying the German copper producer.

Ophir Energy Plc tumbled 16 percent after saying it discovered little evidence of hydrocarbons at a well in Gabon. Antofagasta Plc (ANTO) fell 2.1 percent after brokers from Credit Suisse Group AG to Deutsche Bank AG lowered their ratings on the copper company controlled by Chile’s billionaire Luksic family.

S&P 500 futures expiring in June were little changed after the index jumped 1.7 percent in the last two days, the most in more than a month. FedEx Corp. and General Mills Inc. are among companies reporting earnings today.

Russia Sanctions

The U.S. and the European Union imposed sanctions on Russia after it supported a bid by Crimea, a breakaway region of neighboring Ukraine, to rejoin its territory. The peninsula voted in favor of becoming a part of Russia in a March 16 referendum, which was called after Ukrainian President Viktor Yanukovych fled the country following protests.

Moscow’s Micex index dropped 0.8 percent, snapping a two-day rally. The ruble climbed 0.4 percent to 36.080 against the dollar, the highest since March 6. Ukraine’s hryvnia weakened 0.8 percent to 10.1000 per dollar, depreciating for a third day and set for the lowest level in almost three weeks.

The Shanghai Composite Index fell 0.2 percent as Chinese developers extended declines after the collapse of a private developer spurred concern the industry may face defaults.

China’s central bank said it didn’t participate in an “emergency meeting” on the collapse of Zhejiang Xingrun Real Estate Co., a developer with 3.5 billion yuan ($565 million) of debt. The failure to pay back debts comes two weeks after the country saw its first onshore bond default and coincides with efforts by the government to reduce risks in the financial system.

Default Management

“The manner in which the Chinese authorities resolve these defaults will have important implications on the industry,” Fitch Ratings Ltd. analysts Andy Chang and Kalai Pillay said in a note today. “We believe the authorities will force shareholders and some of the lenders, especially from the non-traditional sectors, to realize their losses.”

China’s yuan slid below 6.20 per dollar for the first time since April as the central bank cut the currency’s fixing. The yuan fell 0.07 percent to close at 6.1965 per dollar in Shanghai, China Foreign Exchange Trade System prices show. The currency touched 6.2040 earlier, the lowest since April 8.

The pound added 0.3 percent to $1.6649 and advanced 0.4 percent to 83.64 pence per euro. Portugal’s 10-year bond yield fell 4.6 basis points to 4.38 percent, after touching 4.31 percent on March 11, the lowest since April 2010.

Gold fell to $1,345.80 an ounce, extending the longest slump since Dec. 19. U.K. natural gas, the European Union’s benchmark contract, dropped for a third day to 56.83 pence a therm. Europe gets about a third of its natural gas from Russia, half of it through Ukraine.

(By Nick Gentle and Shelley Smith)

Source: bloomberg

---