Tuesday, October 19

Dollar slumps as risk appetite rebounds


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NEW YORK — The dollar fell across the board on Thursday as improved risk sentiment in

global financial markets wiped out its gains in the previous session after the US Federal Reserve flagged

plans to dial back its stimulus this year.

Investors’ risk appetite improved after Beijing injected fresh cash into its financial system ahead of

an $83.5 million bond coupon by embattled property giant Evergrande, at risk of becoming one of the world’s

largest-ever corporate defaults.

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Worries about Evergrande’s payment obligations and what systemic risks to China’s financial system the

property giant’s difficulties pose have weighed on global financial risk sentiment in recent sessions.

“Commodity currencies are broadly higher while havens are weaker, leaving the USD trading generally

lower after a firm close following the FOMC (Federal Open Market Committee),” Shaun Osborne, chief currency

strategist at Scotiabank, said in a note.

The US Dollar Currency Index, which measures the greenback against a basket of six rivals, was

0.5% lower at 93.037. The index, which had risen 0.25% on Wednesday, was on pace for its biggest daily

percentage drop in a month but remains close to the near 10-month high touched in late August.

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The offshore Chinese yuan strengthened versus the greenback at 6.4599 per dollar.

The dollar found little support from data that showed the number of Americans filing new claims for

jobless benefits unexpectedly rose last week amid a surge in California.

Thursday’s improved mood boosted risk-sensitive commodity currencies, with the Australian dollar

rising 0.9% and the New Zealand dollar up 1.0%.

The improved risk-appetite was reflected in Wall Street’s major equity indexes, with the S&P 500

on track for a gain of more than 1% and its largest two-day percentage gain since late July.

On Wednesday, the Federal Reserve said it will likely begin reducing its monthly bond purchases as soon

as November and signaled interest rate increases may follow more quickly than expected.

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While positive for the dollar, the boost from the Fed’s announcement was undercut by hawkish messages

from several central banks in Europe, and as Norway became the first developed nation to raise rates.

Norway’s crown jumped to a 3-1/2 month high versus the euro on Thursday after the central bank raised

its benchmark interest rate and said more hikes will follow in the coming months.

Sterling extended its rise on Thursday after the Bank of England said two of its policymakers had voted

for an early end to pandemic-era government bond buying and markets brought forward their expectations for

an interest rate rise to March.

In emerging markets, the Turkish lira plummeted to a record low after a surprise interest rate cut of

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100 basis points to 18% that came despite inflation hitting 19.25% last month

Meanwhile, bitcoin extended its recovery from a sharp fall earlier this week, rising 2.42% to a 3-day

high of $44,642.78.

================================================== ======

Currency bid prices at 3:30PM (1930 GMT)

Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 93.0320 93.4920 -0.49% 3.391% +93.5260 +92.9770

Euro/Dollar $1.1746 $1.1687 +0.51% -3.86% +$1.1750 +$1.1684

Dollar/Yen 110.2550 109.8150 +0.40% +6.71% +110.2550 +109.7550

Euro/Yen 129.49 128.34 +0.90% +2.02% +129.5100 +128.3400

Dollar/Swiss 0.9238 0.9261 -0.24% +4.43% +0.9273 +0.9218

Sterling/Dollar $1.3731 $1.3620 +0.83% +0.52% +$1.3750 +$1.3615

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Dollar/Canadian 1.2649 1.2773 -0.96% -0.66% +1.2796 +1.2634

Aussie/Dollar $0.7305 $0.7242 +0.88% -5.04% +$0.7315 +$0.7223

Euro/Swiss 1.0852 1.0822 +0.28% +0.42% +1.0853 +1.0823

Euro/Sterling 0.8552 0.8581 -0.34% -4.31% +0.8590 +0.8537

NZ $0.7075 $0.7005 +0.96% -1.52% +$0.7093 +$0.6982

Dollar/Dollar

Dollar/Norway 8.5650 8.6555 -1.05% -0.26% +8.6790 +8.5595

Euro/Norway 10.0618 10.1226 -0.60% -3.87% +10.1469 +10.0479

Dollar/Sweden 8.6198 8.6925 -0.44% +5.17% +8.7014 +8.6173

Euro/Sweden 10.1252 10.1700 -0.44% +0.48% +10.1745 +10.1240

(Reporting by Saqib Iqbal Ahmed and Chuck Mikolajczak; Additional reporting Sujata Rao and Saikat

Chatterjee in London and Tom Westbrook in Singapore; Editing by Bernadette Baum, Will Dunham and Hugh

Lawson)

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