Member access

4-Traders Homepage  >  News

News

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesHot NewsMost Read NewsRecomm.Business LeadersVideosCalendar 

Fed stimulus debate leaves dollar at five-week low

07/26/2013 | 06:59am US/Eastern

The dollar held at a five-week low and gold headed for its best month in over 1-1/2 years on Friday, after a report that the U.S. Federal Reserve will next week underline its intention to keep interest rates low for a long time.

Moves by Fed officials to soothe concerns about its stimulus withdrawal plans have seen the dollar tumble this month as financial markets have bounced back strongly from June's mild bout of panic.

Setting the greenback on its latest fall was a Wall Street Journal report that the Fed may debate tweaking its forward guidance message to hammer home its signal that it will not be raising rates any time soon.

Against a basket of currencies <.DXY> it was down 0.4 percent as mid-morning selling pushed it to a fresh 5-week low of 81.579, while gold, often viewed as a hedge against Fed money-printing, consolidated its 10 percent rise this month.

The dollar's slide began on July 10, when minutes of the Fed's June meeting gave investors second thoughts about when the bank would start reducing stimulus and focus is now on next week's two-day meeting that ends on Wednesday.

"We could see more squaring of long dollar positions (ahead of the Fed meeting) keeping the downward pressure on the dollar," said Niels Christensen, currency strategist at Nordea in Copenhagen.

SUPER MARIO

The softer dollar left the euro at a five-week high and eyeing $1.33, while a flurry of merger activity in the media sector not enough to fend off the currency's pressure on European shares <.FTEU3> as early gains turned to minor falls.

Falls of 0.2 percent on London's FTSE <.FTSE> to 0.5 percent on Frankfurt's DAX <.GDAXI> left the pan-regional FTSEurofirst 300 <.FTEU3> and EURO STOXX 600 <.STOXX> facing the prospect of their first weekly drop in over a month.

Nevertheless, it was a milestone day for Europe, marking one year since ECB President Mario Draghi's "Whatever it takes" speech that turned the tide in the euro zone debt crisis.

Italian and Spanish government bonds were slightly lower, but it was otherwise a quiet day for debt markets that last year were in panic mode amid fears the euro could implode. <GVD/EUR>

Most euro zone periphery bonds yields have dropped by at least a third since Draghi's move but it is euro zone bank shares that have been the biggest winners.

The STOXX 600 euro zone bank index <.SX7E> is up 56 percent and France's Credit Agricole (>> CREDIT AGRICOLE) and Spain's Bankinter (>> Bankinter SA) have surged nearly 150 percent, while Italy's UniCredit (>> UniCredit SpA) has risen 74 percent.

"Draghi's speech was a real game changer. Investors' perception of the euro zone dramatically changed, and many people stopped shorting Europe. The systemic fears about Europe's debt crisis are gone," Pierre-Yves Gauthier, head of strategy at AlphaValue, in Paris.

GOLD SHINES

The 0.2 percent dip in European shares added to the earlier 3 percent drop in Tokyo's Nikkei <.N225> to leave world stocks <.MIWO00000PUS> on course for a flat end to what has otherwise been their strongest month in almost two years.

Wall Street was expected to see falls of around 0.3 percent in the S&P 500 and Dow Jones when trading resumes.

With both the Fed and the European Central Bank meeting next week, plus some significant political events in Europe, BNP Paribas economist Ken Wattret said investors were likely to remain cautious.

"You look at the equity markets and the data in the U.S. and Europe has been good yet we are flat, so that probably tells you that we have had a good run and there is a bit of a pause going on," he said.

Gold had also started to sag by 1030 GMT. It edged back to $1,327.5 an ounce but this month's 10 percent jump has been its best run since January 2012, albeit from a near three-year low. <GOL/>

Elsewhere in commodity markets, Copper prices eased 0.5 percent to just below $7,000 a tonne. They had snapped a five-day winning run on Thursday, on concerns that a slowing Chinese economy may dent demand from the world's top consumer.

Brent crude prices also dipped 0.5 percent to around $107.15 a barrel.

"We have a shift in sentiment towards demand concerns following Chinese economic data this week," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.

"Oil ought to be benefiting from the weaker dollar and strengthening U.S. economy, but that is not the theme today."

(Additional reporting Blaise Robinson in Paris and Jessica Mortimer and Christopher Johnson in London; Editing by Toby Chopra)

By Marc Jones

Stocks treated in this article : CREDIT AGRICOLE, Bankinter SA, UniCredit SpA
React to this article
Latest news
Date Title
06:01p Faircourt Split Trust Doubles Monthly Distributions
06:01p ODESIA : Announces Its 2015 First Quarter Financial Results
06:00p FAIRCOURT SPLIT TRUS : Trust : Doubles Monthly Distributions
06:00p ODESIA : Announces Its 2015 First Quarter Financial Results
06:00p IOU Financial Inc.'s Results for the Three Month Period Ended March 31, 2015
05:59p VALEANT PHARMACEUTICALS INTL : Salix Announces FDA Approval of Xifaxan® 550 mg for the Treatment of IBS-D (Irritable Bowel Syndrome with Diarrhea)
05:59p SYSCO : to Webcast Presentation From the 2015 Citi Global Consumer Conference
05:59p IMMERSION : Patent Issued for Systems and Methods for Piezo-Based Haptic Feedback
05:59p CARDTRONICS : U.K. to Sell Retail Cash-in-Transit Operation
05:59p AIRBUS : faces tensions over Spanish board appointment
Latest news
Advertisement
Hot News 
MTY NV : Netherlands stocks higher at close of trade; AEX up 1.44%
SYNERGY HEALTHCARE : Form 8.5 (EPT/RI) - Synergy Health plc
MICHAEL KORS : Announces Fourth Quarter and Annual Fiscal 2015 Results
MERU NETWORKS : Fortinet Announces Agreement to Acquire Meru Networks
DJI : Price Monitoring Extension
Most Read News
06:00p IOU Financial Inc.'s Results for the Three Month Period Ended March 31, 2015
02:10a PLUS500 : AGM Trading Update and Statement
05/26DJSINGAPORE AIRLINES : Flight to Shanghai on Saturday Temporarily Lost Engine Power, Landed Safely
02:08p Tiffany's sales, profit beat on higher tourist spending in Europe
05/26DJGRAIN HIGHLIGHTS : Top Stories Of The Day
Most recommended articles
05:55pDJTeva Reports Small Stake in Mylan
05:48pDJTransocean Hires Mark May as CFO
05:46pDJOil Prices Fall, Taking Cues From Dollar
05:35pDJGerman Finance Minister Urges G-7 to Seek Resolutions
05:29p Greece, creditors have converged in talks but still room to cover - minister