While you were sleeping: USD free to fall

While you were sleeping: USD free to fall

October 26 (BusinessDesk) - A consensus to do nothing has given U.S. dollar bears more reason to continue to push the currency lower, triggering gains for both stocks and bonds on Wall Street.

In mid afternoon trading, the Dow Jones industrial average rose 0.56%, the Standard & Poor's 500 Index advanced 0.51% and the Nasdaq Composite Index climbed 0.7%.

"Without much fundamental news, markets are just following the dollar and the Fed's comments," James Meyer, chief investment officer at Tower Bridge Advisers in West Conshohocken, Pennsylvania, told Reuters.

In a research report, Goldman Sachs said the Federal Open Market Committee was almost certain to announce renewed monetary easing at its November 2-3 meeting.

Goldman analysts calculated the Fed might have to buy up to US$4 trillion in assets to achieve desired growth and inflation targets. They forecast the Fed's second round of quantitative easing will likely be worth US$2 trillion.

The U.S. currency dropped to its lowest level in 15-years against the yen after Group of 20 finance chiefs on Saturday agreed to shun competitive currency devaluations but stopped short of setting targets to reduce trade imbalances clouding global growth prospects.

The ‘consensus’ was viewed as a sign that the U.S. was content to let the greenback continue to depreciate. Gold rose 1%, silver was up 2% and palladium hit its highest price in nearly a decade in a flight to safe-haven assets.

The Dollar Index, which measures its value against a basket of currencies, dropped 0.51% to 77.08.

The G20 statement "didn't go far enough as saying countries won't devalue their currencies so we saw the yen go to a fresh 15-year high," John Doyle, strategist at Tempus Consulting in Washington, told Reuters.

The greenback fell to 80.41 yen on electronic trading platform EBS, its lowest in 15 years.

The Stoxx 600 gained advanced 0.3% to 267.42 at the 4:30 p.m. close in London.

U.S. Treasuries gained amid speculation about the amount of debt the Fed might buy to help bolster the economy by adding liquidity to the market.

The yield on the 30-year bond declined three basis points to 3.9% at 1.48pm in New York, according to BGCantor Market Data. The yield on 10-year notes fell two basis points to 2.54%.

The Treasury sold US$10 billion of five-year Treasury Inflation Protected Securities at a negative yield for the first time at a U.S. debt auction. The securities drew a yield of negative 0.55%, the same as the average forecast in a Bloomberg News survey of 7 of the Fed’s 18 primary dealers.

Oil rose. U.S. crude for December delivery rose 0.1% to US$81.77 per barrel by 1.16pm EDT.

In London, ICE Brent December crude fell 0.13% to US$82.85 a barrel.

(BusinessDesk)

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