Dollar Falls as Fed Signals Easing; Oil, Gold Rebound
The dollar retreated from a four-month high against the euro, while gold rose after Federal Reserve policy makers said more monetary easing may be needed. Oil climbed from a six-month low and Asian stocks gained after better-than-estimated economic data in Japan and Singapore.
The dollar fell 0.2 percent to $1.2744 per euro as of 12:26 p.m. in Tokyo, weakening against 15 of 16 major counterparts. The Australian dollar strengthened 0.2 percent. Crude oil in New York rose 0.4 percent to $93.16 a barrel, gold climbed 0.4 percent and copper gained 0.7 percent. The MSCI Asia Pacific Index (MXAP) added 0.2 percent and Standard & Poor’s 500 Index futures rose 0.4 percent.
Minutes from the last Federal Reserve meeting showed some policy makers said further easing may be needed should the U.S. economy slow. Industrial output in the U.S. rose last month at the fastest pace since December 2010 and Japan’s gross domestic product grew an annualized 4.1 percent in the first quarter, official figures show. Singapore’s non-oil domestic exports increased 8.3 percent from a year earlier in April.
“The Fed is giving a signal to the market that there’s no need for panic, by assuring it will do something before things get really bad,” saidKoji Toda, chief fund manager at Resona Bank Ltd. in Tokyo, which oversees about $68 billion. “Stocks have fallen too quickly recently. They’re at a level we should buy once we see some signs of improvement in Europe.”
More than $3 trillion of global stock market value has been erased this month as concern Greece will exit the euro curbed demand for riskier assets and economic data from China missed estimates. Greece will schedule fresh elections today after political leaders, split over austerity measures tied to a European Union-led bailout, failed to form a coalition government following a May 6 vote.
The Dollar Index, a measure of the currency against six major peers, lost 0.1 percent, snapping a record 13-day rally. A weaker U.S. currency increases the appeal of commodities as alternative assets.
Copper in London gained 0.8 percent to $7,710 a metric ton, rebounding from the lowest level in four months yesterday, as technical signals indicated the metal was oversold. Zinc climbed 0.8 percent and lead rose 0.5 percent. Wheat in Chicago jumped 1.1 percent and silver increased 1.2 percent.
South Korea has enough foreign reserves to cope with the Greek crisis and will take “prompt” action on markets if needed, Vice Finance Minister Shin Je Yoon said today. Bank Indonesia doesn’t want the rupiah to weaken too fast and will continue to intervene in the currency market, Deputy Governor Hartadi Sarwono said yesterday.
The Australian and New Zealand dollars rebounded from five-month lows amid speculation recent declines were excessive. Australia’s currency rose to 99.42 U.S. cents from 99.14 yesterday, while New Zealand’s rose 0.2 percent to 76.61.
“The Australian and New Zealand dollars have fallen too rapidly and we’re seeing some buying back in these currencies,” said Junichi Ishikawa, an analyst in Tokyo at IG Markets Securities Ltd. “Further stimulus from the Fed will be positive for the stocks and commodity markets.”
About twice as many stocks rose as fell in the MSCI Asia Pacific index. The gauge has fallen 11 percent since reaching its 2012 high on Feb. 29 and is now up just 0.5 percent for the year. Hong Kong’s Hang Seng Index rallied 0.5 percent today, South Korea’s Kospi rose 0.4 percent and Taiwan’s Taiex (TWSE) gained 1.3 percent. Japan’s Nikkei (NKY) 225 Stock Average was little changed.
Korea Gas Corp. (036460), the world’s biggest liquefied natural gas importer, jumped 5.9 percent in Seoul trading after its Italian partner reported more gas discoveries in Mozambique. Li & Fung Ltd. (494), a supplier of toys and clothes to Wal-Mart Stores Inc. (WMT) that gets 60 percent of sales in the U.S., advanced 1.8 percent.
Treasuries fell, sending 10-year yields up two basis points to 1.78 percent, before the U.S. sells $13 billion of inflation-protected notes today. The rate slid to 1.75 percent yesterday, approaching the all-time low of 1.67 percent.
The cost of insuring Asia-Pacific bonds from default decreased, according to traders of credit-default swaps. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased one basis point to 195, Royal Bank of Scotland Group Plc prices show. The index is poised to fall for the first time in five business days, after rising to as much as 196.3 yesterday, its highest since Jan. 18, CMA prices show. A basis point is 0.01 percentage point.