Dollar retreats as risk appetite rebounds

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Four thousand US dollars are counted by a banker counting change at a bank in Westminster, Colorado on November 3, 2009. REUTERS / Rick Wilking / File Photo

  • Dollar index down 0.5%
  • Norway becomes first developed central bank to raise rates

NEW YORK, Sept. 23 (Reuters) – The dollar fell broadly on Thursday as improving risk sentiment in global financial markets wiped out any gains it had made in the previous session after the Reserve Federal government has announced its intention to relaunch the stimulus this year.

Investors’ risk appetite improved after Beijing pumped fresh money into its financial system ahead of an $ 83.5 million bond coupon from struggling real estate giant Evergrande, risking becoming the one of the largest corporate defaults in the world. Read more

Concerns over Evergrande’s payment obligations and systemic risks to the Chinese financial system posed by the real estate giant’s struggles have weighed on global sentiment of financial risk in recent sessions.

“Commodity currencies are generally higher while safe havens are weaker, leaving the dollar to trade generally lower after a firm close after the Federal Open Market Committee (FOMC),” said Shaun Osborne, strategist in head of currency at Scotiabank, in a note.

The US dollar currency index, which measures the greenback against a basket of six rivals, fell 0.5% to 93.015. The index, which rose 0.3% on Wednesday, remains close to the nearly 10-month high reached in late August.

The dollar found little support in data which showed the number of Americans filing new jobless claims rose unexpectedly last week amid an increase in California. Read more

Thursday’s improving mood boosted risk-sensitive commodity currencies, with the Australian dollar rising 0.9% and the New Zealand dollar 1.2%.

On Wednesday, the Federal Reserve said it would likely start cutting its monthly bond purchases as early as November and signaled that interest rate increases could follow faster than expected. Read more

While positive for the dollar, the boost from the Fed’s announcement was thwarted by hawkish messages from several central banks in Europe, and Norway became the first developed country to hike rates.

The Norwegian krone hit more than three-month highs against the euro on Thursday after the central bank raised its benchmark interest rate and said more hikes would follow in the coming months. Read more

The pound extended its rise on Thursday after the Bank of England said two of its policymakers voted to end government bond purchases early in the era of the pandemic and markets advanced their expectations of an interest rate hike in March.

In emerging markets, the Turkish lira plunged to a record low after a surprise interest rate cut despite inflation reaching 19.25% last month read more

Meanwhile, bitcoin extended its rally after falling sharply earlier this week, rising 1.18% to a 3-day high of $ 44,102.6.

Reporting by Saqib Iqbal Ahmed; Additional reporting Su, jata Rao and Saikat Chatterjee in London and Tom Westbrook in Singapore; Editing by Bernadette Baum and Hugh Lawson

Our standards: Thomson Reuters Trust Principles.


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