Dollar upended by rates reversal, stocks unfazed for now

Dollar upended by rates reversal, stocks unfazed for now

Dollar upended by rates reversal, stocks unfazed for now

Dollar upended by rates reversal, stocks unfazed for now

The dollar shook its low for the year on Thursday, as the pace of harsh comments from major central banks said the era of easy money could end for the United States.

Support for the dollar has eroded as investors realized that the Fed might not be the only gambling in the city when it came to higher interest rates.

In Britain, Bank of England Governor Mark Carney surprised many by acknowledging an increase since the economy was closer to operating at full capacity.

The Bank of Canada went further, two more advanced lawmakers suggesting it might tighten in July.

This followed comments earlier this week European Central Bank President Mario Draghi that the stimulus could be reduced so as not to be more accommodative as the economy recovers.

The ECB sources sought to reduce discussions, but could not prevent the euro from a maximum of one year against the US dollar.

“If we want to know what the ECB’s plan is, we will choose a carefully written Draghi speech from anonymous sources,” said Sean Callow, currency strategist with Westpac.

“Backed by the strong current account surplus of the euro area and the contrast with the Fed could pause in rate hikes for some time, the euro seems to be targeting $ 1.1500 to 1.1600.”

Thursday, the euro had risen to $ 1.1405, up three percent over as many days.

The euro also rose to a 16-month high on the yen, as investors doubt that the Bank of Japan will be able to track its stimulant for a long time.

The Canadian dollar jumped to $ 1,3027 CA, after enjoying its biggest daily gain in three months, while the British pound rebounded to $ 1.2961.

Against a basket of major currencies, the dollar fell to its lowest level since October 95754 as volatility returned with a vengeance.

Citi operators called “extraordinary” monetary reaction with a turnover of up to twice the daily average on Wednesday.

FUTURE HEADWINDS

“Central banks are very conservative in their approach,” said Martin Whetton, ANZ senior rate strategist.

“But once they start squeezing in concert, and their inflated balances begin to unfold, it’s fair to say that bonds, equities, housing prices and other asset markets will face more stringent counterfacts that they have made long ago “.

The crisis has already led to short-term German yields at their highest level in a year, while 10-year Treasuries yields rose 11 basis points on average this week to 2.23%.

Banking stocks However, the higher interest rate outlook has also strengthened helped the S & P 500 to record its biggest percentage gain in a day in about two months on Wednesday.

The Dow rose 0.68 percent, while the S & P 500 gained 0.88 percent and the Nasdaq 1.43 percent.

Financial services grew after hours as the Federal Reserve approved the plans of the 34 largest banks in the United States to use additional capital for the repurchase of shares and dividends.

Asia continued on Thursday with the Japanese Nikkei adding 0.45% and Australia almost 1%. MSCI’s broader index of Asian stocks outside Japan rose 0.8 percent to its highest level since May 2015.

Eurostoxx futures contracts rose 0.45 percent in early trading, while the FTSE added 0.54 percent.

Weak dollar has helped boost overall products, gold rose 0.3% to $ 1 252.50 an ounce. Prices for copper, lead and zinc peaks reach almost three months on the scarce supply signals and optimism about Chinese demand. [MET / L]

Oil has recovered some of its recent heavy losses after a weekly fall in US production offsetting a surprise buildup in crude stocks in the world’s largest oil consumer. [OR]

On Thursday, US crude raked in 24 cents at $ 44.98 a barrel Brent and added 22 cents to $ 47.53.

(Reporting by Wayne Cole, edited by Eric Meijer and Shri Navaratnam)

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