Log in
Login
Password
Remember
Lost password
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 

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
04:01aEUROZONE : Final Manufacturing PMI as estimates at 52.3
04:01a PERPETUAL INCOME & GROWTH INVEST : AND GROWTH INVESTMENT TRUST PLC - Director Declaration
04:01a ABBOTT LABORATORIES : Announces Positive Results of Its Naturally Dissolving Stent from ABSORB Japan Study
04:01a T3 PRIVATEACCESS : Total cyber protection for the world's most discerning clients
04:01a VALMET : Royal inauguration at Valmet delivered biomass-fired power plant in Oskarshamn in Sweden
04:01a Catapult Your Digital TV Business to New Heights with Wyplay at IBC 2015
04:01a IBC 2015 : V-Nova PERSEUS Demonstrates Unprecedented Performance and Commercial Applications with Tier-1 Partners and Customers
04:01a GovDelivery to Host 6th Annual UK Public Sector Communications Conference
04:01a CANDENTE COPPER : Announces the Execution of Definitive Royalty Agreements on the Canariaco Project With Entree Gold Affiliate
04:01a AAC Holdings, Inc. Investor Class Action Filed by Block & Leviton LLP
Latest news
Advertisement
Hot News 
ENTU UK : Issues Profit Warning As It Decides To Shut Down Solar Division
Whirlpool gatecrashes Aga's sale to Middleby
GEM DIAMONDS : *goldman cuts gem diamonds price target to 155 (160) pence - 'neutral'
Earnings, Trading Statements Calendar - Week Ahead
ROODMICROTEC : secures € 9 million order
Most Read News
08/31 SofTech Announces Q4 and FY 2015 Operating Results
08/31 FHLBank San Francisco Releases July 2015 Cost of Funds Index
08/31 KWANG SUNG ELECTRONICS H K : Appointment of Executive Director and Grant of Share Option
08/31 Fitch Maintains Freescale on Watch Positive Ahead of Merger with NXP
08/31 SILVER BULLION TRUST : Issues Letter to Unitholders
Most recommended articles
03:55aDJValeant Strikes Psoriasis-Drug Pact With AstraZeneca
03:55aDJAsian Shares Pulled Down by China Data--3rd Update
03:53a IMF's Lagarde sees weaker-than-expected global economic growth
03:53aDJRockhopper Says Sidetrack Well Drilling Started at Guendalina Gas Field
03:49aDJLONDON MARKETS : FTSE 100 Falls, As Weak China Data Weighs On Miners