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Forex - Dollar Moves Lower as Geopolitical Tensions Resurface

The dollar moved lower against other major currencies on Friday, despite recent upbeat U.S. data and the possibility of another rate hike by the Federal Reserve this year, as tensions between the U.S. and North Korea re-emerged.

The dollar strengthened broadly after the Fed on Wednesday indicated that one more interest rate hike is likely this year and said it will begin to unwind its $4.5 trillion balance sheet in October.

The greenback was also supported by a string of upbeat reports U.S. jobless claims and manufacturing activity in the Philadelphia area released on Thursday.

But market sentiment weakened after North Korean leader Kim Jong Un said on Friday that Pyongyang will consider the "highest level of hard-line countermeasure in history" against the U.S. in response to President Donald Trump's threat to destroy the country.

Shortly after, North Korea's Foreign Minister Ri Yong Ho said his country could conduct a hydrogen bomb test in the Pacific Ocean of an unprecedented scale.

In his first speech before the United Nations General Assembly on Tuesday, Trump said "the United States has great strength and patience, but if it is forced to defend itself and its allies, we will have no choice but to totally destroy North Korea."

The safe-haven yen and Swiss franc were higher, with USD/JPY sliding 0.37% to 112.03, off the previous session's two-month peak of 112.72, while USD/CHF fell 0.20% to trade at 0.9688.

Elsewhere, EUR/USD rose 0.23% to 1.1969, while GBP/USD held steady at 1.3591, not far from Monday's 15-month highs of 1.3620.

Market participants were looking ahead to a string of data on manufacturing and service sector activity data from the euro zone, due later Friday.

Investors were also eyeing two separate speeches by European Central Bank President Mario Draghi and UK Prime Minister Theresa May, scheduled later in the day.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, wasdown 0.21% at 91.78 by 02:15 a.m. ET (06:15 GMT),off Thursday's one-week highs of 92.42.

Asia stocks slip, yen and franc rise as North Korea moots H-bomb test

Asian stocks fell and the Japanese yen and Swiss franc gained on Friday after North Korea said it might test a hydrogen bomb in the Pacific Ocean and escalated a war of words with U.S. President Donald Trump.

Spreadbetters expected European stocks to start lower amid a chill in risk appetite, forecasting Britain's FTSE (FTSE) to open down 0.3 percent, Germany's DAX (GDAXI) to open 0.2 percent and France's CAC (FCHI) to start 0.05 percent lower.

North Korean Foreign Minister Ri Yong Ho said on Friday he believes the North could consider a nuclear test on an "unprecedented scale" in the Pacific Ocean, South Korea's Yonhap news agency reported.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) handed back earlier gains and was down 0.7 percent.

The index rose to a decade high on Tuesday, lifted as Wall Street advanced to record levels, but fell back after the Fed heightened expectations for a third interest rate hike this year.

South Korea's KOSPI (KS11) fell 0.9 percent on the latest bout of geopolitical tensions.

Australian stocks (AXJO) managed to advance 0.3 percent while Japan's Nikkei (N225) slipped 0.4 percent following a rise to a two-year high on Thursday.

"The headline about North Korea's nuclear test gave a little shock to the market," said Takuya Takahashi, a strategist at Daiwa Securities in Tokyo.

"Though the market is not expecting that there will be an immediate military action, it has triggered a profit-taking opportunity since the Nikkei had risen sharply recently."

Hong Kong's Hang Seng (HSI) shed 0.8 percent and Shanghai (SSEC) was down 0.5 percent after 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 debt build-up.

The dollar dropped 0.6 percent to 111.785 yen , pulling away from a two-month high of 112.725 touched on Thursday when U.S. yields spiked on the back of the Fed's hawkish stance.

The 10-year Treasury yield (US10YT=RR) declined about 3 basis points to 2.251 percent as risk aversion favoured government bonds. It had risen for nine consecutive sessions prior, brushing a six-week high of 2.289 percent.

The Swiss franc rose 0.2 percent to 0.9687 franc per dollar . The yen and franc are often sought in time of broader risk aversion.

Safe-haven gold ticked up, with spot prices up 0.5 percent at $1,297.11 an ounce , after marking its lowest since Aug. 25 at $1,287.61 in the previous session on a firmer dollar. [GOL/]

Apart from geopolitical risks, the focus was on how the region's markets would fare when the Federal Reserve takes a step towards normalising monetary policy, as it projected on Wednesday following its policy meeting.

"It is difficult to pass a verdict on the Fed's stance until it actually starts its balance sheet reduction and the markets can gauge its effects," said Kota Hirayama, senior economist at SMBC Nikko Securities in Tokyo.

"Fundamentals continue to support emerging markets including those in Asia, although the Fed's latest stance did add a layer of uncertainty going forward."

In currencies, the Australian dollar was down 0.1 percent at $0.7926 after sliding 1.2 percent the previous day when Reserve Bank of Australia Governor Philip Lowe said the central bank does not have to follow a general move globally to raise interest rates.

A sharp drop in the price of iron ore, Australia's main export commodity, to a two-month low, has also weighed on the currency.

The New Zealand dollar was down 0.3 percent at $0.7284 on jitters ahead of a hotly-contested general election on Saturday. [AUD/]

The euro inched up 0.1 percent to $1.1954 and on track to end the week 0.8 percent lower.

The dollar index against a basket of six major currencies was down 0.2 percent at 92.052.

Crude oil prices were little changed amid a wait-and-see mood as ministers from the Organization of the Petroleum Exporting Countries, Russia and other producers meet later on Friday to discuss a possible extension of supply cuts. [O/R]

Brent crude (LCOc1) was down 0.1 percent at $56.39 a barrel after reaching a five-month high of $56.53 overnight.

Dollar shines, Asia shares slip after Fed signals Dec rate hike

The U.S. dollar shone while Asian shares slipped on Thursday after the U.S. Federal Reserve announced a plan to start shrinking its balance sheet and signalled one more rate hike later this year.

European shares are expected to benefit from a fall in the euro against the dollar with spread betters looking at a higher opening of 0.5 percent in Germany's DAX (GDAXI) and France's CAC (FCHI).

Japan's Nikkei (N225) gained 0.2 percent as a rise in U.S. bond yields lifted financial shares, while the yen's fall against the dollar after the Fed's decision helped exporters.

The Bank of Japan, as widely expected, left its policy settings unchanged, with markets awaiting a news conference by its governor later in the day.

MSCI's broadest dollar-denominated index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) fell 0.5 percent, with Australian shares (AXJO) among the hardest hit with fall of 0.8 percent.

Major U.S. share indexes recovered quickly from initial losses following the Fed's announcement, with the S&P 500 (SPX) ending slightly higher, helped in part by gains in financials (SPSY) and energy shares (SPNY)

"While a rate hike is negative, the fact that the Fed's confidence in the economy is strong enough to expect a rate hike can be taken as supportive of market sentiment," said Soichiro Monji, chief strategist at Daiwa SB Investments.

The Fed's view also prompted a rotation from tech shares into financial shares, which benefit from higher interest rates, he added.

"In a way, what the Fed did was not much of a surprise. From now, the markets will be focusing on individual earnings rather than macro themes," said Hisashi Iwama, senior portfolio manager at Asset Management One.

As expected, the Fed said it would begin in October to trim its massive holding of U.S. Treasury bonds and mortgage-backed securities acquired in the years after the 2008 financial crisis.

The Fed signalled it still expects one more interest rate hike by the end of the year, despite a recent bout of low inflation, but ratcheted down its long-term interest rate forecasts.

Fed fund rate futures are now pricing in about a 65 percent chance of a rate hike by December compared to around 50 percent before the latest meeting. Markets expect the Fed move to coincide with revisions of its economic projections.

The yield on two-year U.S. Treasury notes jumped to 1.451 percent (US2YT=RR), its highest level since November 2008 late on Wednesday. The 10-year U.S. Treasuries yield (US10YT=RR) rose to 2.278 percent, briefly hitting a six-week high of 2.289 percent.

"The markets reacted to the Fed quite straightforwardly, with shorter yields rising more than long-dated bond yields. The bond markets have fairly strong conviction that low inflation and low growth will persist," said Hiroko Iwaki, senior strategist at Mizuho Securities.

In the currency market, the rise in Treasury yields boosted the dollar's attractiveness. The euro dropped to $1.1883 from above $1.20 just before the Fed's policy announcement.

Likewise the dollar jumped to 112.595 yen , a two-month high, from around 111.30.

Gold also hit a three-week low of $1,296 per ounce.

Oil prices flirted with multi-month highs, despite a rise in U.S. crude inventories, after the Iraqi oil minister said OPEC and its partners were considering extending or deepening output cuts, ahead of the planned meeting between OPEC and non-OPEC nations on Friday.

Brent crude futures (LCOc1) rose to a five-month high of $56.48 a barrel on Wednesday and last stood at $56.17, down slightly from late U.S. levels.

U.S. benchmark West Texas Intermediate (WTI) crude futures (CLc1) hit a four-month high of $50.79 per barrel and last traded at $50.64, down slightly from the U.S. close on Wednesday.

Fed Holds Rates Steady, Signals Plan for December Rate Hike

The Federal Reserve kept interest rates unchanged on Wednesday and said it would start winding down its massive holdings of bonds in October.

In a move largely expected by financial markets, the policymaking Federal Open Market Committee (FOMC) agreed to keep its benchmark rate target at 1%-1.25%, forecasting at least one more hike this year.

The accompanying statement also revealed the Fed’s plan to reduce its $4.5 trillion balance sheet it built up in the wake of financial crisis. The central bank expects to begin normalization of its balance sheet in October, sticking with the plan detailed in June.

In a sign of confidence in the U.S. economy, members of the rate-setting committee revised upwards their projections for economic growth this year and stuck with the previous rate-hike outlook released in June.

They forecast U.S. economic growth of 2.4% in 2017, a 0.2% increase from the previous projection of 2.2% in June. The trend of slowing inflation, however, forced the central bank to scale back its inflation expectation to 1.5% for 2017, down 0.2% from the 1.7% forecast in June.

The "dot plot," part of the FOMC's Summary of Economic Projections, indicated that the central bank saw rates rising to between 1.25% and 1.5% by the end of the 2017. With rates steady at 1-1.25%, that points to one further rate hike this year. The majority of traders - more than 70% - expect the rate hike in December, according to Investing.com's fed rate monitor tool.

The statement also highlighted that the impact on the economy of Hurricanes Harvey, Irma and Maria are "unlikely" to alter the course of the economy over the medium term.

"Storm-related disruptions and rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term," the statement said.

The mostly unchanged view on a year-end rate hike saw US treasury yields move sharply higher, lifting the dollar to session highs while gold came under pressure.

The dollar rose 0.22% to trade at 91.81 while the U.S. 10-Year rose sharply to 2.264.

Gold Futures fell to $1,309.75.

Forex - Dollar Index Slips Lower with Eyes on Fed Decision

The dollar slipped lower against other major counterparts on Wednesday, as investors remained cautious ahead of the Federal Reserve's policy statement due later in the day and amid fresh geopolitical concerns.

EUR/USD added 0.12% to a one-week high of 1.2010.

Sentiment on the greenback remained fragile as investors awaited the outcome of the Fed's monthly policy meeting.

The U.S. central bank was widely expected to leave interest rates on hold, but it was also likely to announce plans to trim its $4.2 trillion in bond holdings.

The safe-haven yen and Swiss franc, with USD/JPY down 0.21% at 111.35 and with USD/CHF shedding 0.24% to 0.9604.

Traders were also cautious amid potentially higher tensions between the U.S. and North Korea following hawkish statements from U.S. President Donald Trump.

In his first speech before the United Nations General Assembly on Tuesday, Trump said"the United States has great strength and patience, but if it is forced to defend itself and its allies, we will have no choice but to totally destroy North Korea."

Elsewhere, GBP/USD edged 0.18% higher to 1.3525, off Monday's 15-month peak of 1.3619.

The New Zealand dollar was stronger, as NZD/USD climbed 0.77% to a six-week high of 0.7370 after official data earlier showed that New Zealand's current account surplus swung into a deficit of NZ$620,000 in the second quarter from a surplus of NZ$240,000 in the previous quarter.

Analysts were expected a current account deficit of NZ$880,000 in the last quarter.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.12% at 91.51 by 02:15 a.m. ET (06:15 GMT),the lowest since September 11.

Asia stocks steady, dollar treads water as investors count down to Fed

Asian stocks were mostly steady on Wednesday after Wall Street again rose to record highs, although movements were limited as a wait-and-see mood prevailed before the Federal Reserve reveals its monetary policy stance later in the day.

Spreadbetters expected Britain's FTSE (FTSE) to start unchanged and Germany's DAX (GDAXI) and France's CAC (FCHI) to each open down about 0.1 percent.

The caution in financial markets ahead of the Fed has kept some investors from making sharper adjustments to their positions despite potentially higher tensions over the Korean peninsula following hawkish statements from U.S. President Donald Trump overnight.

The Fed is due to announce its decision at 1800 GMT on Wednesday and is widely expected to keep rates unchanged after a two-day meeting but could begin paring its bond holdings, with reductions likely to start in coming months.

The financial markets will also sift through the "dot plot" representing Fed policymakers' rate projections for any hints of a rate hike in December.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) was up 0.05 percent.

Japan's Nikkei (N225) was effectively flat. Shanghai (SSEC) added 0.3 percent while Hong Kong's Hang Seng (HSI) added 0.2 percent.

The three major U.S. stock indexes edged higher on Tuesday, logging record closes, with financial stocks providing the biggest boost. (N)

"A benign outcome for equities would be the Fed going somewhere in between being too passive on reducing its bond holdings and too aggressive in hiking interest rates," said Soichiro Monji, chief strategist at Daiwa SB Investments in Tokyo.

"There may be some speculation towards the Fed sounding slightly dovish, but over the last few weeks hawkish rhetoric has come into vogue globally as demonstrated by the Bank of Canada and Bank of England," he said.

The Canadian central bank hiked interest rates this month and left the door open for more tightening, while a BoE policymaker hinted last week that it might need to raise rates in the coming months.

Expectations for the Fed to raise interest rates in December have risen since.

According to CME FedWatch, markets are pricing in a more than 50 percent chance of a Fed hike in December, up from around 31 percent as recently as Sept. 8.

The dollar hovered close to an eight-week high against the yen, buoyed with U.S. Treasury yields having risen to one-month highs before the Fed's policy announcement.

The greenback was little changed at 111.460 yen after touching 111.880 overnight, its highest since late July.

Currency markets had a muted reaction to Trump's latest comments on North Korea.

Trump said in a speech to the U.N. General Assembly on Tuesday that the United States will be forced to "totally destroy" North Korea unless Pyongyang backs down from its nuclear challenge.

South Korea's KOSPI (KS11) was down 0.05 percent and the won was up 0.2 percent at 1,128.6 to the dollar.

"Trump's comments were actually very strong and the won would have moved more if it were not for the overall cautious mood before the Fed's decision," said Kim Doo-un, a foreign exchange analyst at Hana Financial Investment Seoul.

For now, broader risk sentiment was yet to be swayed by Trump's comments.

"The market doesn't seem to have any strong risk-off sentiment, even after Trump's comments," said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.

The euro edged up to touch $1.2019 , its highest since Sept. 11.

The dollar index (DXY) against a basket of six major currencies was little changed at 91.747.

The Mexican peso pulled back slightly after dropping in response to a strong earthquake that struck central Mexico. The currency stood at 17.8165 pesos per dollar after touching 17.8500 overnight, its weakest in two weeks.

The 10-year Treasury note yield (US10YT=RR) stood close to 2.246 percent, the one-month peak set the previous day.

In commodities, oil prices rose after Iraq's oil minister said OPEC and other crude producers were considering extending or even deepening a supply cut to curb a global glut, while a report showed a smaller-than-expected increase in U.S. inventories. [O/R]

Brent crude futures (LCOc1) were up 0.3 percent at $55.30 a barrel and U.S. crude (CLc1) rose 0.6 percent to $49.76 a barrel.

Asian shares slip as investors await Fed meeting for rate clues

Asian shares slipped on Tuesday, hobbled by uncertainty as traders awaited a Federal Reserve meeting for clues on U.S. monetary policy, though sentiment was supported by record highs on Wall Street.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) was down 0.2 percent after wobbling between positive and negative territory in early trading.

Futures suggested a lacklustre start to the European trading day, with the Eurostoxx 50 (STXEc1) and FTSE futures (FFIc1) both slightly lower, and DAX futures (FDXc1) up 0.1 percent

On Wall Street on Monday, the Dow Jones Industrial Average (DJI) closed at a record high for the fifth straight session, and the S&P 500 (SPX) marked its second straight closing record high, as higher U.S. Treasury yields helped lift financial shares. (N)

At a two-day meeting beginning later on Tuesday, the Fed is expected to take another step toward policy normalization and announce plans to begin unwinding its $4.2 trillion portfolio of Treasuries and mortgage-backed securities.

The Fed is expected to hold interest rates steady, with investors looking for clues on its anticipated pace of further tightening later this year and next. The market is pricing in an approximately even chance of a hike in December.

"If the Fed does keep the option for December alive, and reaffirms its view in terms of gradual rate increases, that may be dollar-supportive, given the more benign rate-hike path priced by the market," said Mitul Kotecha, head of Asia macro strategy for Barclays(LON:BARC) in Singapore.

"This is likely to give the dollar support going into the end of this week," he said.

"So we might see Asian currencies fail to make any significant gains, and they may even be on the back foot, if we do see the dollar resume more upside," Kotecha added.

Japan's Nikkei stock index (N225) ended 2 percent higher after touching its highest levels since late June, catching up to global equities gains and a weaker yen as Tokyo markets reopened after a public holiday on Monday.

On Thursday, the Bank of Japan will also hold a regular policy meeting, and is widely expected to maintain the status quo as inflation remains stubbornly weak despite a modest economic recovery.

Investors were also debating any potential market impact from a possible snap election.

Prime Minister Shinzo Abe is considering calling a poll for as early as next month to take advantage of his improved approval ratings and disarray in the main opposition party, according to government and ruling party sources.

"There has been concern among foreign investors, about the future of Abenomics and the Abe administration, with clear declines in Abe's approval ratings earlier this year," said Stefan Worrall, director of Japan equity sales at Credit Suisse (SIX:CSGN) in Tokyo.

"If Abe is cemented in power for another few years, that would be a market-positive event," he said. "Certainty is preferred to uncertainty, when it comes to market confidence."

The Nikkei has gained nearly 30 percent since Abe attained political power in late 2012.

South Korean shares (KS11) dipped 0.1 percent, against a backdrop of caution ahead of the Fed meeting as well as continuing tensions on the Korean peninsula.

U.S. Defense Secretary Jim Mattis hinted on Monday about the existence of military options on North Korea that might spare Seoul from a brutal counterattack. But he declined to say what kind of options he was talking about or whether they involved the use of lethal force.

The dollar index, which tracks the greenback against a basket of six major rivals, inched 0.1 percent lower to 91.928 (DXY). The euro was 0.2 percent higher at $1.1980 .

The dollar added 0.2 against its Japanese counterpart to 111.81 , its highest since late July.

Higher U.S. yields bolstered the greenback, with the benchmark 10-year note yield (US10YT=RR) notching a one-month high of 2.237 percent overnight.

Crude oil prices were unsteady, but stayed near last week's multimonth highs. Traders braced for a potential stockpile build-up expected later this week, limiting the prospect for further gains.

U.S. crude futures (CLc1) were down 1 cent at $49.90 per barrel, within sight of Thursday's nearly four-month high of $50.50. Brent crude (LCOc1) slipped 0.1 percent to $55.42, not far from an almost five-month high of $55.99 marked on Thursday.

Oil steady on tighter Middle East supplies, as rising U.S. output weighs

Oil markets held largely steady on Tuesday, even as OPEC producers Saudi Arabia and Iraq pointed to a reduction in supplies in line with efforts to tighten the market and prop up prices.

Prices were capped by rising U.S. shale output and fears that another strong hurricane hitting the Caribbean could knock out refineries and disrupt shipping to and from the United States.

Brent crude futures (LCOc1), the international benchmark for oil prices, were at $55.50 per barrel at 0653 GMT, up 2 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures (CLc1) were at $50.01 per barrel, up 10 cents, or 0.2 percent, from their last settlement.

Iraq's oil minister Jabbar al-Luaibi said on Tuesday that his country's crude oil production was currently at 4.32 million barrels per day (bpd). That compares to almost 4.5 million bpd in May and June.

His comments came after data showed Saudi crude exports fell to 6.693 million bpd in July, down from 6.889 million bpd in June.

Saudi Arabia is the de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), which together with some non-OPEC producers like Russia, has pledged to hold back around 1.8 million bpd of supplies this year and into 2018 in order to tighten the market and prop up prices.

But with the United States not part of this agreement, analysts said the upside for prices was limited due to the rising U.S. output.

U.S. shale production is set to rise for a tenth month in a row in October, the U.S. government said late on Monday. Output across seven shale plays is forecast to rise by nearly 79,000 bpd to 6.1 million bpd, according to the U.S. Energy Information Administration.

"Technological advancements continue to make inroads in the U.S. shale industry, boosting well-level economics ... 80 percent of the cost base is below $60 per barrel (and) breakevens have fallen a further 15 percent just in the last year," Barclays (LON:BARC) bank said in its September market outlook.

It said significant numbers of producers could also operate below $40 per barrel.

"We remain bearish on prices at current levels due to expected shale growth, Chinese economy concerns," the bank said, adding that its average Brent and WTI price forecast was $53 and $49 per barrel, respectively, for this year and $52 and $49 per barrel for 2018.

U.S. oil prices hit $50 on rising refinery demand, falling rig count

U.S. crude oil prices rose above $50 per barrel on Monday and were near last week's multi-month highs as the number of U.S. rigs drilling for new production fell and refineries continued to restart after getting knocked out by Hurricane Harvey.

U.S. West Texas Intermediate (WTI) crude futures (CLc1) were trading up 10 cents, or 0.2 percent, at $49.99 by 0653 GMT, after earlier nudging above the $50 per barrel mark towards the more than three-month high of $50.50 reached last Thursday.

Brent crude futures (LCOc1), the benchmark for oil prices outside the United States, were at $55.66 a barrel, up 4 cents, and also not far from the near five-month high of $55.99 touched on Thursday.

"Demand forecasts from OPEC and IEA ... continued to improve sentiment in the market. Refineries are also reporting a much better recovery from the recent hurricanes," ANZ bank said on Monday.

Oil refineries across the Gulf of Mexico and the Caribbean were restarting after being shut due to hurricanes Harvey and Irma, which battered the region over the past three weeks.

Royal Dutch Shell's (L:RDSa) Deer Park refinery in Texas was among the latest, beginning its restart on Sunday. The plant can process 325,700 barrels per day.

The refinery restarts are occurring "as signs emerge of stalling growth in the U.S. shale industry. The number of rigs drilling for oil in the U.S. fell sharply last week," ANZ said.

U.S. energy firms cut seven oil rigs in the week to Sept. 15, bringing the total to 749, the fewest since June, energy services company Baker Hughes said on Friday.

Despite these signs of a tightening market, analysts warned that distortions from the recent hurricanes made it hard to identify more long-lasting supply and demand fundamentals.

"This week's crude inventories data will almost certainly still show the distortions of Harvey and Irma and significant increases may be looked at by traders as outlier data," said Jeffrey Halley, senior market analyst at futures brokerage OANDA.

Hedge funds and other money managers cut their bullish bets on U.S. crude futures and options in the week to Sept. 12, the U.S. Commodity Futures Trading Commission reported on Friday.

Asia stocks hit decade high, dollar holds nerve for Fed meeting

Asian shares hit decade highs on Monday and the dollar gained on the yen early in a week in which the U.S. Federal Reserve is likely to wrestle with its bloated balance sheet as part of a long reversal of super-cheap money worldwide.

European and U.S. stocks looked set to echo those gains, with Eurostoxx 50 futures (STXEc1) up 0.46 percent and the FTSE (FFIc1) 0.43 percent, while E-Mini futures for the S&P 500 (ESc1) rose 0.25 percent.

There was relief the weekend passed with no new provocation by North Korea, though Pyongyang's nuclear ambitions will be center stage when U.S. President Donald Trump addresses world leaders at the United Nations on Tuesday.

Some details of Trump's tax reform plans may also emerge this week, while elections in Germany and New Zealand will add extra political uncertainty to the mix.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) rose 0.9 percent to reach heights not visited since late 2007.

Samsung Electronics (KS:005930) led the gains to reach an all-time top as global demand for hi-tech gadgets remains strong, while healthcare and financial stocks also drew buyers.

Australia's index (AXJO) added 0.5 percent while Japan's Nikkei (N225) was closed for a holiday.

For markets, the main event will be the Fed's meeting on Tuesday and Wednesday, where it is likely to take another step toward policy normalization amid what is rapidly becoming a global trend.

Canada has already hiked twice in recent months and the Bank of England shocked many last week by flagging its own coming increases.

Yet investors are far from convinced the Fed will move on rates again this year, with December put at less than a 50 percent probability in the futures market <0#FF:>.

"It is fair to say that in our recent travels most of the investors we have spoken to question not just a December hike, but whether the Fed will hike at all again this cycle," said Tom Porcelli, chief U.S. economist at RBC Capital Markets.

"When you press investors on the why, the standard reply is the lack of inflationary pressures."

Porcelli, however, argued the market was underestimating the risk of tightening and predicted not only a hike in December but four more over 2018.

Yields on U.S. 10-year Treasuries (US10YT=RR) did jump a hefty 14 basis points last week, and still trailed the UK where yields on 10-year paper (GB10YT=RR) surged 30 basis points.

STERLING RESURGENT

The seismic shift in rates saw sterling hit its highest since the Brexit vote and notch its best week in almost nine years against a currency basket. [GBP/]

On Monday, the pound was a shade softer at $1.3585 but not far from the peak of $1.3615. The euro was steady at $1.1945 , sandwiched between support at $1.1836 and resistance at $1.2092.

The dollar held firm on the yen at 111.20 , with the Bank of Japan widely expected to maintain its massive asset buying campaign at a meeting on Thursday.

Political uncertainty also made a surprise appearance after sources said Japanese Prime Minister Shinzo Abe was considering calling a snap election for as early as next month to take advantage of his improved approval ratings and disarray in the main opposition party.

Against a basket of currencies, the dollar was idling at 91.869 (DXY) and still uncomfortably close to the recent 2-1/2 year trough of 91.011.

The modest bounce in the dollar combined with all the talk of monetary tightening put gold on the defensive. The precious metal was off 0.1 percent at $1,317.78 an ounce .

Oil prices were hovering near five-month highs helped by a fall in the number of U.S. rigs drilling for new production and as refineries continued to restart after getting knocked out by Hurricane Harvey. [O/R]

Brent crude (LCOc1) was up 7 cents at $55.69 a barrel, following gains of 3.3 percent last week. U.S. crude (CLc1) firmed 7 cents to $49.97 a barrel.