·         The dollar weakened against a basket of currencies on Thursday, retreating from a more than two-week peak as bets stoked by the Federal Reserve signalling it may raise interest rates in December abated.

Some traders had speculated the Fed led by Chair Janet Yellen may soften its stance on raising interest rates a third time in 2017 as inflation has been stuck below its 2 percent goal and amid signs of weaker business activity in the aftermath of two hurricanes that hammered two southern U.S. states.

·         “People were surprised that Yellen stuck with the script that weak inflation is transitory so there was some short-covering,” said Paresh Upadhyaya, director of currency strategy at Amundi Pioneer Asset Management in Boston.

·         At 10:55 a.m. (1455 GMT), an index that tracks the dollar against six currencies was down 0.2 percent at 92.365. It reached 92.697 on Wednesday, its highest since Sept. 5.

The greenback firmed against the yen, hitting a two-month peak at 112.71 yen in overseas trading. It was last up 0.06 percent at 112.28 yen.

·         The probability for at least one additional rate hike by the end of the year stood at 78.4 percent, according to the CME Group's FedWatch tool on Friday, up from about 51 percent just prior to the Fed statement.

·         Monetary policy is not the right instrument to address financial imbalances in the euro zone and macroprudential tools must be used to tackle local issues, European Central Bank President Mario Draghi said on Thursday.

“Financial and business cycles can potentially become de-synchronised, meaning that financial imbalances can grow in an environment characterised by relatively muted inflation,” Draghi said in his capacity as the head of the European Systemic Risk Board.

·         On Thursday, ECB President Mario Draghi said monetary policy is not an appropriate tool to address financial imbalances but offered no fresh insight on the central bank’s asset purchase programme.

 “Anything he says that doesn’t sound dovish, the market will take it as hawkish,” some analysts said.

·         Angela Merkel’s conservatives maintained a strong lead over their rival Social Democrats (SPD), who lost ground slightly, in a poll published on Thursday, three days before an election the German chancellor is set to win.

The Forschungsgruppe Wahlen poll for broadcaster ZDF showed Merkel’s CDU/CSU bloc was unchanged on 36 percent while the SPD dropped by 1.5 points to 21.5 percent.

 

The anti-immigrant Alternative for Germany (AfD), which is expected to become the first far-right party in parliament for more than half a century, looked set to come third with 11 percent - one point more than last week.

 

·         U.S. President Donald Trump ordered new sanctions against North Korea on Thursday and Pyongyang’s leader defiantly vowed to persist with its nuclear and missile programs and said it would consider measures against the United States.

Tensions have risen as Pyongyang has resisted intense international pressure and the rhetoric between Trump and Kim Jong Un has also escalated. The U.S. president on Tuesday called him a ‘rocket man’ on a suicide mission and Kim described Trump early on Friday in Asia as “mentally deranged”.

·         China’s foreign minister on Thursday called on North Korea not to go further in a “dangerous direction” with its nuclear program and said negotiations were the only way out of the crisis over Pyongyang’s weapons development.

·         North Korean Minister of Foreign Affairs Ri Yong Ho said that his country may consider a test of a hydrogen bomb in the Pacific Ocean, according to a report from South Korea's official news agency Yonhap.

Ri said the potential test of "the most powerful detonation of an H-bomb" would be one possible "highest-level" action against the U.S., according to the report.

He added that he didn't know what actions would be ordered by Kim Jong-un, Yonhap reported.

·         S&P Global Ratings downgraded China’s long-term sovereign credit rating on Thursday, less than a month ahead of one of the country’s most sensitive political gatherings, citing increasing risks from its rapid build-up of debt.

S&P’s one-notch downgrade to A+ from AA- comes as Beijing grapples with the challenges of containing financial risks stemming from years of credit-fueled stimulus to meet ambitious government economic growth targets.

While S&P’s move put its China ratings on par with those of Moody’s and Fitch, the timing raised eyebrows just weeks ahead of a twice-a-decade Communist Party Congress (CPC), which will see a key leadership reshuffle and the setting of policy priorities for the next five years.

·         Oil prices settled nearly flat on Thursday, the eve of a meeting of major oil-producing countries in Vienna to discuss whether they will extend production limits that have helped reduce the global crude glut.

Ministers from the Organization of the Petroleum Exporting Countries, Russia and other producers meet on Friday. They will discuss a possible extension of 1.8 million barrels per day (bpd) of supply cuts to support prices and will consider monitoring exports to assess compliance.

·         U.S. crude futures dipped 14 cents, or 0.3 percent, to settle at $50.55 a barrel. Brent crude futures rose 14 cents, or 0.3 percent, to end at $56.43 a barrel.

Oil prices have gained more than 15 percent in the past three months to trade above $56 a barrel, suggesting the deal is making progress in getting rid of excess supply.

Reference: Reuters, CNBC