Published: Thu, January 10, 2019
Finance | By Loren Pratt

Dollar slips on Powell views; optimism on trade talks aids Aussie dollar

Dollar slips on Powell views; optimism on trade talks aids Aussie dollar

Fed Chairman Jerome Powell (pic) has said the Fed is not on a preset path of rate hikes and will be sensitive to the downside risks markets are pricing in. The pan-European STOXX 600 .STOXX finished down 0.15 percent.

Asian shares sped ahead on Monday as a dovish turn by the Federal Reserve and startlingly strong data soothed some of the market's worst fears about the global outlook.

"The newsflow we have seen since Friday has lifted sentiment", said Michael McCarthy, chief markets strategist at CMC Markets in Sydney. The Australian dollar extended gains of almost 0.4 percent against the greenback.

He warned, however, that there is continued uncertainty about global growth, trade talks between the United States and China and USA monetary policy.

Powell's comments that the central bank is "prepared to shift the stance of policy" boosted investor sentiment and sent USA stocks soaring on Friday. The boost to stock markets saw them recapture all the year's losses and push into positive territory for 2019 so far, with Wall St's main indices closing up more than 3 percent by the close on Friday.

The Federal Reserve may only need to raise interest rates once in 2019, Atlanta Fed President Raphael Bostic said on Monday, focusing on business executives' nervousness about the economy and a global slowdown as factors that may hold the U.S. central bank back.

The dollar outperformed other currencies in 2018 due to the Fed being the only major central bank to hike rates.

Analysts at Bank of America Merrill Lynch noted global equity markets had lost $19.9 trillion since January a year ago, and a record $84 billion had flowed out of stocks in just the past six weeks.

The dollar index is down by 0.238 points, or about 0.25% at 95.512, coming off an earlier high of 95.688.

Wee said he still expects the Fed to hike rates twice this year.

Chinese stocks firmed after the country's central bank announced an easing in policy on Friday, with 100 basis points of cuts to bank reserve requirements freeing up around $116 billion for new lending.

Indicating increased interest in bullion, holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, also rose to 798.25 tonnes on Friday, their highest since July 31, 2018.

The People's Bank of China said on Friday it would cut the amount of cash lenders must hold as reserves.

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

The gain was mostly led by the Australian dollar, which posted a surge of 1.78 percent against United States dollar.

In commodities, Brent crude advanced 1.9% to $58.14 a barrel.

The two sides have until March 1 to make a deal, after which Trump has pledged to ramp up tariffs to 25 percent, from 10 percent, on $200 billion worth of Chinese imports.

The MSCI Asia Pacific Index climbed for a third day, gaining 1.9 percent as of 4:18 Tokyo.Futures on the S&P 500 gained 0.5 percent.

The effect was apparent in the Australian dollar, which is often used as a liquid proxy for emerging markets and China risk.

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