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
02:05p Venezuelan state firm PDVSA's oil revenue slips 7.6 percent in 2014
02:01p XCEL ENERGY : Sierra Club ads blast Minnesota Power coal plants
02:01p RAUTE : received a new order worth EUR 13 million to Estonia
02:01p AFFECTO : Listing of Affecto's 2013 option rights
02:01p INNOCOLL : Announces Pricing of Follow-On Offering
02:01p VIGMED : to First North Premier (102/15)
02:01p MIDE EAST : Oil increases slightly to above $65 on Yemen air strikes
02:01p PAZOO : Confirms Paying Off Note to Union Capital LLC, and Continues to Move Forward With Harris Lee, LLC
02:01p NOKIA : Notification under Chapter 9, Section 10 of the Finnish Securities Market Act: holdings of JPMorgan Chase & Co. in Nokia Corporation exceeded 5%
02:01p BURSA MALAYSIA BERHAD : Most powerful IPO this year
Latest news
Advertisement
Hot News 
GCP STUDENT LIVING : Dividend Declaration and Net Asset Valuation
AERIE PHARMACEUTICALS : Pharma plunges aftermarket as Rhopressa study fails
SYQIC : Gets Working Capital Facility Offer, Improves Cash Position
INNATE PHARMA : and AstraZeneca announce global agreement for IPH2201 in immuno-oncology
French Connection warns on full-year results
Most Read News
04/24 SONY : raises FY 2015 profit forecast to $2.5 billion: Nikkei
04/24DJSTARBUCKS : Works to Get Cash Registers Back On Line
04/24 DEUTSCHE BANK : to split off Postbank via stock market - trade union
04/24 APPLE AIMS TO SHIP MORE THAN 20 MILLION SMARTWATCHES IN 2015 : sources
04/24 Comcast drops Time Warner Cable bid after antitrust pressure
Most recommended articles
02:05p Venezuelan state firm PDVSA's oil revenue slips 7.6 percent in 2014
01:56p Greece, lenders must reach deal by early May, Deputy PM tells paper
01:51p Up to 150,000 Bangladesh workers lost jobs after Rana Plaza safety overhaul
01:47p VOLKSWAGEN : Lower Saxony premier says Volkswagen Chairman's exit was 'unavoidable'
01:46p Lower Saxony premier says VW Chairman's exit was 'unavoidable'
Dynamic quotes  
ON
| OFF