Dollar stands tall as investors await this week's Fed meeting

The dollar inched higher on Monday ahead of the U.S. Federal Reserve's meeting that was expected to deliver an interest rate hike as well as clues to future monetary policy, while the euro remained under pressure after the European Central Bank's dovish moves last week.

The U.S. central bank is widely expected to hike interest rates for the first time in 2016 at a two-day meeting that begins on Tuesday, even as investors wait to see if policymakers take a more cautious tone on the economy.

Markets were pricing in a nearly 100 percent chance for a quarter percentage point increase to the Fed's target range. Investors will be scrutinizing the Fed's economic projections for signs of any change following Donald Trump's surprise victory in the U.S. presidential election on Nov. 8.

"As we have been saying, it's not so much about what the Fed does, but more about what they say," said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.

Investors have continued to build up long dollar positions on expectations of higher inflation with increased infrastructure spending under the Trump administration.

"Part of the positioning is also seasonal, as some players try to accumulate long dollar positions ahead of the Christmas holiday," Murata added.

Speculators increased positive bets on the U.S. dollar for a third straight week through Dec. 6, pushing net longs to their highest since early January, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday. [IMM/FX]

The dollar edged up 0.1 percent to 115.43 yen JPY= after earlier touching 115.55 yen, its loftiest peak since February.

The euro slipped 0.2 percent to $1.0541 EUR=, moving closer to the $1.0505 level that would mark its lowest point in around 21 months.

The common currency remains under pressure after the European Central Bank announced on Thursday that it will extend its bond-buying programme longer than many investors had anticipated, although it trimmed the size of its monthly purchases.

The ECB's move also put more upward pressure on already rising U.S. Treasury yields, which also bolstered the dollar's appeal.

The benchmark 10-year Treasury note yield US10YT=RR was last at 2.491 percent, above its U.S. close of 2.464 percent on Friday and closing in on its nearly 1-1/2 year peak set on Dec. 1.

The dollar index, which tracks the greenback against a basket of six major rivals, was 0.1 percent higher on the day at 101.65 .DXY

Source: www.reuters.com

Oil prices soar on global producer deal to cut crude output

Oil prices shot up by 4 percent to their highest level since 2015 early on Monday after OPEC and other producers over the weekend reached their first deal since 2001 to jointly reduce output in order to rein in oversupply and prop up the market.

Brent crude futures, the international benchmark for oil prices, soared to $57.89 per barrel in overnight trading between Sunday and Monday, its highest level since July 2015.

U.S. West Texas Intermediate (WTI) crude futures also hit a July 2015 high of $54.51 a barrel.

Brent and WTI prices eased to $56.55 and $53.70 respectively by 0043 GMT (7:43 p.m. ET), but were both still up more than 4 percent from their last settlement.

With the deal finally signed after almost a year of arguing within the Organization of the Petroleum Exporting Countries and mistrust in the willingness of non-OPEC Russia to play ball, the market's focus will now switch to compliance of the agreement.

AB Bernstein said that the agreed deal "amounts to an aggregate supply cut of 1.76 million barrels per day (bpd) from 24 countries which currently produce 52.6 million bpd or 54 percent of world oil supply."

Bernstein said that "some of the non-OPEC supply cuts will come from natural decline, but most will come from self-imposed cuts.

ANZ bank said on Monday that Saudi Aramco, Saudi Arabia's state-controlled oil company, had "started informing customers that their allocations would be reduced in January 2017, in line with its commitment to the recent OPEC production cut agreement."

OPEC has said it will slash output by 1.2 million bpd from Jan. 1, with top exporter Saudi Arabia cutting around 486,000 bpd in a bid to end overproduction that has dogged markets for two years.

On Saturday, producers from outside OPEC agreed to reduce output by 558,000 bpd, short of the initial target of 600,000 bpd but still the largest contribution by non-OPEC ever.

Of that, Russia said it would gradually cut 300,000 bpd, adding that by the end of March it would be producing 200,000 bpd less than its October 2016 level of 11.247 million bpd.

Russian output would fall to 10.947 million bpd after six months, it said.

"Once cuts are implemented at the start of 2017, oil markets will shift from surplus into deficit. Given the cuts in production announced by OPEC, we expect that markets will move into a 0.8 million bpd deficit in 1H17," AB Bernstein said.

Source: www.reuters.com