Dollar crunched by cautious Fed, bonds and commodities cheer
Dollar crunched by cautious Fed, bonds and commodities cheer:- The dollar nursed painful losses in Asia on Thursday while sovereign bonds savored their biggest rally in nine months after the Federal Reserve hiked interest rates, as expected, but signaled no pick-up in the pace of tightening.
The euro got an added bonus when returns showed the anti-EU party of Geert Wilders won fewer seats than expected in Dutch elections, soothing fears that public opinion was swinging inexorably toward a break-up of the union.
The sigh of relief was heard across Asia as investors had feared faster U.S. hikes and more political upheaval in Europe could spook funds out of emerging markets.
"The Fed makes the world safe for risk until June," said CitiFX strategist Steven Englander. "Buy emerging market FX, equities, commodities."
Gold, copper and oil all rallied as the dollar dropped. MSCI's broadest index of Asia-Pacific shares outside Japan jumped 1.2 percent to its highest level since mid-2015.
Spread betters pointed to solid opening gains for European bourses, while E-mini futures for the S&P 500 edged up another 0.1 percent.
South Korea's market climbed 0.6 percent, and even Japan's Nikkei managed a slight rise despite the damage done to exporters by a firmer yen.
Shanghai stocks added 0.7 percent with investors seemingly untroubled as China's central bank raised short-term rates for the third time in as many months.
The Dow had ended Wednesday with gains of 0.54 percent, while the S&P 500 added 0.84 percent and the Nasdaq 0.74 percent.
The Fed lifted its funds rate by 25 basis points, as expected, to a range of 0.75 percent to 1.00 percent, but said further increases would only be "gradual."
Crucially, officials stuck to their outlook for two more hikes this year and three more in 2018, when many had expected an accelerated spate of moves.
Rather, the Fed said its inflation target was "symmetric," indicating that after a decade of below-target inflation it could tolerate a quicker pace of price rises.
That was painful news for bond bears who had built up huge short positions in Treasuries in anticipation of a hawkish Fed.
DOLLAR DOLDRUMS
Yields on two-year notes were down at 1.30 percent, having fallen 8 basis points overnight in the biggest daily drop since June last year.
The drop pulled the rug out from under the dollar, which sank to a three-week low of 100.510 against a basket of currencies.
The euro was taking in the view at $1.0727, having climbed 1.2 percent overnight in its steepest rise since June. The dollar suffered similar losses on the yen to huddle at 113.38.
Source:- http://www.reuters.com/article/us-global-markets-idUSKBN16M3C9
