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
Latest news
Date Title
1m ago WALGREEN : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)
1m ago AVIATION CAPITAL GROUP CORP. : Announces Tender Offer for Any and All of ACG Trust III’s Class G-1 Floating Rate Notes Series 2005-1 Due 2035
2m ago Albion's losing run continues
2m ago ADIDAS : See Jeremy Scott's Music-Meets-Bondage Collaboration for Adidas
2m ago CATHEDRAL ENERGY SERVICES : Drills 1,000 Wells for Tundra Oil & Gas
3m ago US MIDTERM ELECTIONS : Last Chance For Keystone XL? – Analysis
3m ago APPLE : An Apple a day keeps us mobile
3m ago PIONEER NATURAL RESOURCES : Results of Operations and Financial Condition, Regulation FD Disclosure (form 8-K)
3m ago SANTANDER CONSUMER USA : Change in Directors or Principal Officers (form 8-K)
3m ago Brookfield Canada reports 3Q results
Latest news
Advertisement
Hot News 
BANCO ESPIRITO SANTO : Novo Banco's Angolan Bank to Lose Most of Loan From Collapsed Banco Espirito Santo
DOMINION MIDSTREAM PARTNERS : Entry into a Material Definitive Agreement, Change in Directors or Principal Officers, Amendments to Articles of Inc. or Bylaws; Change in Fiscal Year, Financial Statements and Exhibits (form 8-K)
NUTRECO : SHV and Nutreco announce a recommended cash offer of EUR 40 per share for all shares of Nutreco
PRESIDENT ENERGY : Oil Discovery in Paraguayan Chaco
SINOCOKING COAL AND COKE CHEM IND : Aboveground Syngas Facility Commences Operations
Most Read News
7h ago Lufthansa pilots extend strike to ground long-haul flights
1d agoDJENERGY DEVELOPMENT : Secures $315 Million Financing For Wind Project
9h ago Adidas shares jump on report of bid for Reebok unit
8m ago U.S. stocks end higher despite drag from IBM
1d ago MICROSOFT PLANS TO LAUNCH SMARTWATCH WITHIN WEEKS : Forbes
Most recommended articles
5m ago JAPAN'S JAVA WARS : Convenience stores angle for coffee market crown
6m ago EURCAD Hits Target- Long Scalps Eye 1.4457 Resistance
8m ago U.S. stocks end higher despite drag from IBM
9m ago SHORTER WAIT : China's M&A watchdog halves time taken to approve deals
9m agoDJConsumer Companies Up as Sears, Hasbro Report Progress -- Consumer Roundup
Dynamic quotes  
ON
| OFF