[Asia Economy New York=Correspondent Baek Jong-min] The introduction of the average inflation targeting system announced by the U.S. Federal Reserve (Fed) continued to have a significant impact on the New York financial market for the second day. The stock market maintained its upward trend, and gold prices surged. The dollar remained weak.
On the 28th (local time), the Dow Jones Industrial Average rose 161.60 points (0.57%) to close at 28,653.87, the S&P 500 index increased by 23.46 points (0.67%) to 3,508.01, and the Nasdaq index closed up 70.30 points (0.6%) at 11,695.63.
With this rise, the S&P 500 index continued to reach record highs, and the Dow also turned to an upward trend on an annual basis. The weekly gains were 2.59% for the Dow, 3.26% for the S&P 500, and 3.39% for the Nasdaq.
The impact of the introduction of the average inflation targeting system on the financial market was markedly contrasted compared to the previous day.
The dollar index, which shows the value of the dollar against major currencies, fell 0.76% to 92.287 on the day. The introduction of the average inflation targeting system led to expectations that the Fed would maintain zero interest rates for an extended period, causing the dollar's value to weaken. The dollar's weakness combined with the effect of Japanese Prime Minister Shinzo Abe's resignation led to the yen strengthening against the dollar.
The decline in the dollar index led to a rise in gold prices. Despite the Fed's introduction of the average inflation targeting system, gold prices, which had fallen the previous day, showed a strong upward trend. December delivery gold closed at $1,974.90 per ounce, up 2.2% ($42.30).
On the other hand, the U.S. 10-year Treasury yield, which had been rising the day before, declined.
On the day, James Bullard, President of the Federal Reserve Bank of St. Louis, mentioned the Fed's change in direction by saying, "The Fed can tolerate inflation of 2.5% for quite a long time."
The Department of Commerce announced that personal consumption expenditures (PCE) in July increased by 1.9% (seasonally adjusted) compared to the previous month. This was better than the market expectation of a 1.6% increase.
Although consumption growth slowed compared to June's 6.2% increase, it maintained an upward trend despite the threat of a resurgence of the novel coronavirus (COVID-19), sending a positive signal to the market.
October delivery West Texas Intermediate (WTI) crude oil closed down 0.2% ($0.07) at $42.97 per barrel.
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