The dollar is slipping, reversing its earlier gains versus the euro, as US stocks take a sharp move down. "Stocks are getting hit pretty hard, putting the dollar on the defensive ... it seems financials are getting whacked," said a US-based currency trader who said he knows of no other reason why the dollar would be declining; Fed's Yellen, he pointed out, was hawkish on inflation, which would tend to be good for USD. Recently, EUR/USD at 1.5695 from 1.5697 late Fri. USD/JPY was at 107.20 from 106.72. DJIA down 50.
No Chance Of 50 BP Hike By October
While short-dated fed-funds futures are relatively stable, credit worries convince traders that the Fed won't tighten more than 25 BP by Oct. 28-29 meeting. Nov contract rises to level eliminating expectations for 50 BP hike to 2.5%. Recently at 97.775, up 5.5 BP, pricing in about 94% chance 25 BP hike to 2.25%. Market had been fully priced for 2.25% earlier this session, and fully priced for 2.5% as recently as June 25, the last FOMC meeting date
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