Dollar skids as U.S. rate pause bets weigh

Lloyd Doyle
January 9, 2019

Financial markets are also optimistic about United States 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.

The dollar advanced 0.2 percent versus the offshore yuan to 6.8483.

This, along with a 100 basis point cut in China's bank reserve requirement ratios and comments from Fed Chair Jerome Powell that the US central bank would be flexible in its approach in 2019, has been the main driver for the recovery. Silver edged 0.1 per cent lower to $15.63 per ounce, while platinum rose 0.2 per cent to $823.50, having touched highest in more than a month at $831.10 on Monday.

But Saxo Bank's Hansen said demand for gold as a safe haven would remain because "a dovish Fed is more of a potential worry that the US economy is not as strong as the market expects".

Risk appetite got a huge boost on Friday when the US payrolls report showed 312,000 net new jobs were created in December, while wages rose at a brisk annual pace of 3.2 percent.

On Friday, Powell told the American Economic Association that the Fed is not on a preset path of interest rate hikes and that it will be sensitive to the downside risks markets are pricing in. If the Fed holds rates in 2019, analysts see slim chances of further greenback appreciation.

Yet, Fed fund futures still implied a rate of 2.33 percent by December, compared to the current effective rate of 2.40 percent.

However, with global stocks largely staying higher amid renewed optimism about a U.S.


In any case, Friday was a strong session for Wall Street, with the Dow recording gains of 3.29 percent, while the S&P 500 jumped 3.43 percent and the Nasdaq 4.26 percent.

Goldman Sachs researchers expect a bounce in equity markets in 2019.

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

"Our Bull & Bear Indicator has fallen to an "extreme bear" reading, triggering the first "buy" signal for risk assets since June 2016", they wrote in a note.

The metal, used mainly in emissions-reducing auto catalysts for vehicles, gained 0.5 percent to $1,306.55. The Aussie was up at $0.7124 on Monday, having briefly dived as deep as $0.6715 last Thursday. The euro was firmer at $1.1413, while the dollar index eased a touch to 96.102.

Money markets have priced out a US rate hike this year and are even pricing in a small probability of a rate cut in 2020.

Oil prices started firmer after Brent bounced about 9.3 percent last week, while WTI rose 5.8 percent. The crude benchmark rose 135 cents on Monday to $58.42 a barrel, while USA crude futures gained 111 cents to $49.07.

Other reports by Iphone Fresh

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