Mexico central bank to raise interest rates following Fed

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Central banks in Switzerland and Britain are also scheduled to weigh in with policy. The yuan held stable in early trade, trading at 6.7854 per dollar in the offshore trade.

The Fed raised interest rates on Wednesday for the second time in three months and said it would begin cutting its holdings of bonds and other securities this year, signaling its confidence in a growing US economy and strengthening job market, Reuters reported. The dollar jumped 1.2% against the Japanese yen to ¥110.93 and the euro fell 0.7% against the dollar to $1.1146.

The core rate of inflation increased at 1.7 percent on the year, the fourth consecutive month of deceleration and the slowest overall pace in two years. Interest to add fresh shorts gained traction on the break of $1.1185 support, said the traders, who asked not to be identified as they weren't authorized to speak publicly.

The MSCI All-Country World index .MIWD00000PUS was up 0.1 percent and has remained stuck in a tight range this month.

Investors appear more concerned about Eurozone inflation.

"Although the hawkish surprise offered a temporary boost to the dollar, markets have not bought into this newfound optimism as expectations of another interest rate increase in 2017 now stand below 50%". European bonds tracked the move in Treasuries on Wednesday, with the yield on benchmark United Kingdom bonds rising three basis points to 0.95 % and those of French and German peers increasing five and three basis points, respectively.

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Indeed, the flattening of the yield curve, a line that traces yields across maturities, over the course of the week indicates that "the market and the Fed are not on the same page", said Ward McCarthy, chief financial economist at Jefferies, in a note to clients.

While the Federal Reserve did hike U.S. interest rates, underwhelming United States inflation data and a lower inflation forecast from the Fed has led to speculation that there won't be any further USA interest rate hikes before the end of the year.

The Bloomberg Dollar Spot Index rose 0.3% following three days of losses.

The euro was also unchanged at $1.1217, below a seven-month peak of $1.1296 scaled overnight.

The Fed has a 2 percent inflation target and tracks an inflation measure which is now at 1.5 percent. The process could start "relatively soon", Fed Chair Janet Yellen said.

The Commerce Department reported that retail sales fell 0.3 percent in May due to a steep decline in automobile purchases as well as appliance and electronics sales. Policy makers agreed to raise their benchmark lending rate for the third time in six months, maintained their outlook for one more hike in 2017 and set out some details for how they intend to shrink their $4.5 trillion balance sheet this year. Thomson Reuters CRB index tumbled to 14-month lows, having fallen nearly 12 per cent from this year's high hit in January. Wellington and Taipei also saw healthy gains but Shanghai ended off 0.3 percent.

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