Forex - Dollar Broadly Lower With All Eyes On Fed

World Week Ahead: Eyes squarely on Fed

Stocks rallied for a fifth day, sending the benchmark index Monday to a new all-time high near 8,300 points, following a record-breaking Wall Street session amid optimism the USA will pursue a peaceful resolution to North Korea's nuclear threats.

The pan-European Stoxx 600 edged down by around 0.21 percent shortly after the opening bell, with nearly all sectors and major bourses in negative territory.

Talk of more stringent monetary policy supported the dollar, which is holding around 111.50 yen, while the pound rowed back from levels above $1.36 after the head of the Bank of England indicated possible British rate hikes could be slow and gradual. The Fed is also expected to leave the door open for a rate increase at their December 12-13 meeting. Investors also are looking for indications of when and how central bankers will start selling off bonds bought to shore up economic growth after the 2008 crisis.

Traders seemed to be bracing for an on balance dovish message from the Fed, even though the market still expected a rate hike at the end of the year to be more likely than not.

Currency markets had a muted reaction to Trump's latest comments on North Korea. MSCI's index of world stocks was last up 0.2 percent and hit an intraday record high of 487.07.

In the speech, Trump warned that the United States will be forced to "totally destroy" North Korea unless Pyongyang backs down from its nuclear challenge, but the criticism was not enough to spook investors. While the dollar lost some steam on Friday after data showed an unexpected drop in U.S. retail sales in August, it began the week on firm footing against the yen, following last week's solid performance.The dollar gained almost 2.8 percent against the yen last week, buoyed by a rise in U.S. Treasury yields that bolstered the greenback's appeal, and as data showing a pick up in U.S. consumer prices helped rekindle expectations that the Federal Reserve could raise interest rates again in December."We've certainly seen some adjustment on the December rate hike probabilities". The week will also bring with it housing starts figures on Tuesday, existing home sales on Wednesday, the Federal Housing Finance Agency's house price index on Thursday and the PMI composite flash on Friday.

Investors typically sell shares of utilities and telecoms as well as high dividend payers when interest rates rise, partly because they lose their appeal as bond proxies since investors can expect similar returns investing in bonds, which are seen as safer assets.

Shanghai gained 0.1 percent, while Singapore and Sydney each gained 0.2 percent.

In the NY session, USA existing home sales data for August and crude oil inventories data are slated for release.

The greenback held steady against the euro in the European session, following a 9-day decline to 1.2020 at 9:45 pm ET. Brent crude, used to price global oils, was up $1.05, or 1.9 percent, to $56.19 a barrel in London.

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