Dollar weak on Powell views; China easing, trade optimism lift Aussie dollar

11 January, 2019, 18:35 | Author: Eric Barnett
  • U.S. Dollar

That compares with the mid-2000s, when the Fed increased the benchmark rate by 4.25 percentage points over two years.

Financial markets are also optimistic about US officials meeting with their counterparts in Beijing this week for the first face-to-face talks since President Donald Trump and President Xi Jinping on december 1 agreed to a 90-day truce in their trade war.

Powell on Friday said the USA central bank would be more sensitive to downside risks in the market, adding that it was "prepared to shift the stance of policy" if needed.

The euro advanced 0.22 percent versus the dollar while the Australian dollar, often considered a barometer of global risk appetite, rose 0.2 pct and touched its highest level since December 20.

"And particularly with muted inflation readings that we've seen coming in, we will be patient as we watch to see how the economy evolves", he noted.

European shares edged lower following a strong session in Asia on Monday, after USA stocks surged in the previous session on fresh signs of economic strength and the Federal Reserve said it would be flexible with its interest-rate policy.

US and Chinese officials will begin trade negotiations on Monday in the hope of reaching a deal during a 90-day truce between President Donald Trump and his counterpart Xi Jinping. FTSE 100 Index futures gained 0.1 percent.Japan's Topix index rallied 2.8 percent at the close.

Yields on two-year Treasuries rose to 2.49 percent, from a trough of 2.37 percent, but were still below those on one-year paper.

The euro was fetching US$1.1478, gaining 0.05 percent.


Powell has another speech on Thursday to expand on his thinking, while there are at least eight other Fed officials scheduled to speak this week. The S&P 500 Index climbed 3.4 percent Friday, when the Dow Jones Industrial Average advanced 3.3 percent.

Analysts at Bank of America Merrill Lynch noted global equity markets had lost $19.9 trillion since January a year ago, and a record $84 billion had flowed out of stocks in just the past six weeks.

The U.S. dollar bought 108.60 Japanese yen, higher than 108.52 Japanese yen of the previous session.

The US dollar index fell marginally to 95.64.

The latter had already received a boost from news Sino-U.S. trade talks were back on, as well as a natural bounce from the wild "flash crash" that rocked markets last week.

In late NY trading, the euro was up to 1.1478 dollars from 1.1398 dollars in the previous session, and the British pound was up to 1.2769 dollars from 1.2740 USA dollars in the previous session.

Gold benefited from the diminished risk of US rate hikes and held at $1,287.78, just off a six-month top.

Oil prices firmed after Brent bounced about 9.3 percent last week. Fresh talks between the US and China on trade, and Powell's remarks sapped demand for the dollar as the yen led gains in G-10 currencies.

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