Dollar softening boosts equities, commodities

Thu Feb 4, 2016 4:34pm EST
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By Chuck Mikolajczak

NEW YORK (Reuters) - Global equity markets rose on Thursday as diminished expectations of U.S. interest rate hikes this year pushed the dollar lower, which in turned boosted the prices of many commodities.

The dollar fell for a fourth day on the latest batch of soft U.S. data, while comments from a U.S. Federal Reserve policymaker on Wednesday were viewed as a sign further rate hikes could be delayed.

Those comments were buttressed on Thursday by Robert Kaplan, the new head of the Dallas Fed, who said the central bank should be "patient" on rate increases.

"The big move down in the dollar seems as much about the Fed and the reality that aside from the employment data in the U.S., you haven’t gotten a lot of good news anywhere you have looked," said Brian Nick, head of tactical asset allocation for UBS Wealth Management Americas in New York.

"Even though everybody else is still easing, it seems like the Fed is going to be on hold, our call has moved from March to September, so lower for longer is the word."

The recent weakness in the greenback has provided investors the incentive to take profits in successful trades against commodities and emerging markets, which had suffered after a run higher by the dollar.

The U.S. currency fell 0.8 percent against a basket of major currencies on Thursday and is down 3 percent for the week, on pace for its worst week since May 2009. It hit a 3-1/2 month low against the euro EUR= and held close to a two-week low against the Japanese yen JPY=.

Oil was volatile, fluctuating between gains and losses, following a sharp climb in the prior session, as investors assessed the potential for talks on a production cut.   Continued...

Traders work at their desks in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany, January 29, 2016. REUTERS/Staff