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US dollar nurses drop on Yellen rate outlook as Aussie stocks rally
[NEW YORK] The dollar maintained losses, trading near its weakest level since 2014 against the yen, after Janet Yellen signaled the Federal Reserve may put off further interest-rate increases should the turmoil in global markets continue. Australian stocks rallied from a 2 1/2-year low.
A Bloomberg gauge of the dollar versus 10 major peers was near its lowest level since November after Ms Yellen's comments initially buoyed American stocks, before they retreated into the close. While Australia's benchmark snapped a four-day drop, futures on US indexes declined, with markets in Tokyo, Shanghai, Taiwan and Vietnam shut Thursday, as those in Hong Kong and South Korea return. Australian 10-year bonds advanced for a third session following an advance in Treasuries. US crude traded below US$28 a barrel.
"Janet Yellen had a delicate task last night - to sound concerned enough to reassure investors that the Fed was feeling their pain, while still sounding upbeat enough to bolster the notion that this volatility will all blow over," Sharon Zollner, a senior economist in Auckland at ANZ Bank New Zealand, said in a client note. "The Fed has no idea how this is going to pan out either, so all Yellen could really do was ensure she wasn't the catalyst for the lurch."
Ms Yellen's testimony before Congress did little to quell market volatility, with the central bank chief saying the Fed still expects to raise rates gradually while making it clear that continued turmoil may alter its forecasts. She highlighted uncertainty over the pace of China's growth and the related rout in commodities, concerns that have roiled financial markets throughout the year and twice pushed global shares to the brink of a bear market.
Markets buckled earlier this week as Deutsche Bank AG sparked concern European bank creditworthiness was weakening as oil's rout took US crude below US$28 a barrel. While central banks from Japan to Europe have signaled additional stimulus is at the ready, market volatility has intensified in recent weeks. Ms Yellen's acknowledgment that the ructions have clouded global growth added to the anxiety.
Australia's S&P/ASX 200 Index gained 0.2 per cent as of 8:46 am Tokyo time, with healthcare stocks and telephone companies leading the charge higher. The S&P/NZX 50 Index in New Zealand fell 0.1 per cent in a third day of losses.
S&P 500 Index futures dropped 0.4 per cent with contracts on the Dow Jones Industrial Average, which shed 0.6 per cent last session amid losses for Walt Disney Co. and International Business Machines Corp. The S&P 500 initially climbed on Yellen's comments, before reversing that advance to end Wednesday down less than 0.1 per cent, a second straight day of closing basically little changed.
Markets in mainland China and Taiwan remain closed for the rest of the week for the Lunar New Year holidays, while Japan resumes Friday. An update on Malaysian factory output is due Thursday and the Philippines reviews benchmark rates.