Thursday Dec 12, 2024
Thursday Dec 12, 2024
Friday, 25 March 2016 00:00 - - {{hitsCtrl.values.hits}}
Reuters: The dollar was on its best run in almost a year on Thursday, pressuring commodities and shares after yet another Federal Reserve official talked up the chance of more than one hike in U.S interest rates this year.
If the dollar can keep its footing going into the long Easter weekend it will notch up a near 2% gain, and the first weekly rise in a month against the world’s other major currencies.
The hot streak extended after St. Louis Fed President James Bullard joined a chorus of officials in highlighting the chance of at least two rate rises this year, with the first perhaps as soon as April.
Markets now imply only one increase and dealers suspect an orchestrated attempt by the Fed to shift that thinking.
Equity investors tend to dislike any hint of tighter U.S. policy and European shares were down over 1%, their biggest tumble in over a week, as they faced a fourth straight session in the red.
Wall Street was also looking at a difficult start as oil slipped back under $40 a barrel and rekindled jitters about emerging market producer countries and firms.
It was never going to be the relaxing pre-Easter holiday session some traders may have been hoping for. A deluge of data had already started with a fall in durable goods orders highlighting the strains a strong dollar exerts.
“We are going defensive again,” said Hans Peterson, SEB investment management’s global head of asset allocation.
“I think it could be a slow adjustment downwards (in risk assets) for a month or two months but it’s hard to guess. The dollar is rising and macro demand and stronger demand in commodities is not really there.”
Asia shares had dropped overnight too as the relapse in commodity prices and sharp move in China’s yuan took their toll.
In Europe, figures showed German consumer morale has dipped while UK retail sales fell, albeit slightly less than expected, as a comparatively warm British winter hit clothes retailers.
The euro eased to $1.1150, leaving it well off last week’s top of $1.1342. Sterling also slid as low as $1.4064 and was set for its biggest weekly drop against a basket of currencies in six years due to concerns that this week militant attacks in Brussels could aid the campaign for Britain to leave the European Union in a June vote.
For all the Fed’s chatter about multiple hikes, the bond and interest rate markets seemed far less convinced than the dollar.
