Dollar dips on Fed comments, shares firmer

LONDON (Reuters): Global shares edged higher and the dollar hit a three-week low against a basket of currencies on Thursday after the Federal Reserve reaffirmed its willingness to help if the US economy weakened, though it raised its growth outlook slightly.

Strong corporate profits emerging from the United States and Europe and a dip in oil prices also supported investor confidence, but markets remain cautious ahead of a key test of demand for euro zone debt on Friday when Italy will sell new bonds.

“Despite its projections that GDP growth will pick up, the FOMC expects unemployment to remain well above target by the end of 2014. This means that there is scope for further monetary easing down the road, especially if the recovery falters,” said Philip Marey, strategist at Rabobank.

The dollar index edged down to 78.96 after Fed Chairman Ben Bernanke’s comments, with the US unit suffering more against higher yielding currencies. It hit a seven-month low against the Canadian dollar and sterling.

The euro was up 0.1 per cent at $1.3233, near a three-week high of $1.3237 touched on Wednesday.

The Fed’s reassuring words lifted share markets in Asia and the US, pushing the MSCI world equity index up 0.2 per cent to 326.86, making its gains for the year over 9 per cent.

European equities were supported by a crop of strong corporate earnings, but political uncertainty in the region and a mixed performance in the financial sector kept a lid on gains. The FTSEurofirst 300 was up 0.1 per cent at 1,043.24 in early trade.

Asian shares rose on Thursday, retaining positive momentum as the Federal Reserve reassured markets it would keep its very accommodative stance to support growth, while optimism grew over strong quarterly corporate earnings.

Investor confidence was also boosted by a rally in Apple Inc. shares as it reported quarterly profits nearly doubling on the back of soaring iPhone sales in China, lifting tech-heavy Asian markets such as Taiwan and South Korea earlier in the day.

There was scepticism Asian markets would climb as much as their global counterparts did overnight, however, as concerns remain over European banks, with Spain’s Santander reporting its first-quarter results later in the session.