By Wanfeng Zhou
NEW YORK, Dec 13 (Reuters) - The U.S. dollar hovered near a
five-year high against the yen and rose against the euro on
Friday, while global equity indexes slipped on growing concerns
the U.S. Federal Reserve could surprise investors by scaling
back its stimulus as early as next week.
Stronger-than-expected U.S. data and a budget deal in
Washington have brightened the outlook for the U.S. economy, but
are causing jitters in equity markets, which have benefited from
ample central bank liquidity. The current Thomson Reuters
consensus among economists is still for the Fed to begin
withdrawing stimulus in March.
'There's a lot of uncertainty going into the meeting and
some are talking about a small taper next week, although that is
not our view. We still think the Fed will wait until January to
make any announcement,' said Greg Moore, currency strategist, at
TD Securities in Toronto.
The Fed will hold its last policy meeting of the year on
Tuesday and Wednesday.
Concerns about a possible Fed surprise next week resulted in
U.S.-based funds pulling $6.51 billion out of stock mutual funds
in the past week, the biggest outflow this year, according to
Thomson Reuters Lipper data released on Thursday.
The MSCI world equity index was down 0.1
percent at 391.70 points, taking its losses for the past two
weeks to 2.6 percent and putting it on track for its biggest
fortnightly loss since June.
The prospect of Fed tapering boosted the dollar, with the
euro falling 0.2 percent to $1.3731.
The dollar slipped against the yen after earlier hitting
five-year highs. It last traded at 103.17 yen, down 0.2
percent on the day.
U.S. stocks were mostly lower after a three-day drop. The
Dow Jones industrial average gained 6.81 points, or 0.04
percent, to 15,746.24. The Standard & Poor's 500 Index
dropped 1.33 points, or 0.07 percent, to 1,774.17. The Nasdaq
Composite Index lost 2.32 points, or 0.06 percent, to
The pan-European FTSEurofirst 300 touched two-month
lows and ended down 0.1 percent at 1243.47 points.
Emerging markets were also hit, with sell-offs in currencies
-- including the Indonesian rupiah and the Indian rupee -- on concern that tighter Fed policy could sap flows
into emerging markets.
'We have taken down our exposure to some of the smaller
markets, as the tapering can be a hassle for some
emerging-market currencies,' said Hans Peterson, the global head
of investment strategy at SEB Private Banking.
Given the scale of the market moves in anticipation of the
Fed meeting, some analysts said a rebound in equities was
possible once the meeting is over, whether the Fed acts or not.
'I think either way we can get a relief rally post the Fed,
because either we will get a very small taper and really strong
guidance on rates, or we will get no taper,' said Alan Higgins,
chief investment officer, UK, at Coutts.
Expectations for Fed tapering and prospects for oil ports in
eastern Libya to resume exports pressured oil prices.
January Brent gained 13 cents to $108.80 a barrel in
seesaw trading, following a fall of more than $1 on Thursday.
Brent has slipped 3 percent so far this week, the steepest
weekly loss since the end of September.
U.S. crude futures for January fell 90 cents to
settle at $96.60 a barrel, after rising around $6 in the past
Gold rose about 1 percent to $1,235 an ounce after a two-day
fall, but sentiment remained fragile.
Benchmark U.S. 10-year Treasury notes last
traded up 4/32 in price to yield 2.8628 percent, after data
showed muted inflation pressures, reviving hopes the Federal
Reserve will not reduce its bond purchase stimulus program next
Two-year German yields hit a three-month high
as banks repaid the highest weekly amount since February to the
European Central Bank.
(Editing by Leslie Adler)
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