Europe shares, German bond yields ease
Dollar index steady before Bernanke testimony
The dollar hovered near a three-year high and German debt yields eased yesterday as expectations hardened that the head of the US central bank later in the day would not signal any change to its ultra-loose policy. US stock futures pointed to a firmer open on Wall Street as well, where the Dow and the S&P 500 indexes currently stand at all-time highs.
Public comments from several top Federal Reserve officials in the past 24-hours have strengthened the market’s view that Chairman Ben Bernanke will point to the need for more certainty over the economic outlook before changing policy when he addresses a congressional committee at 1400 GMT. New York Fed President William Dudley, a close Bernanke ally, was the latest to comment, telling Bloomberg TV in an interview aired yesterday, that it was too soon to taper back the $85 billion in monthly asset purchases. “I think three or four months from now you’ll have a much better sense of (whether) the economy (is) healthy enough,” Dudley said. The dollar recovered from a slight dip against a basket of major currencies to be virtually unchanged at 83.84, just below a near three-year high of 84.37 struck last week. The euro added 0.25 percent to $1.2937. The dollar index is up nearly 5 percent this year as investors favor the greenback on signs of growing economic momentum and talk of an early end to its huge stimulus effort.
“The market’s bias has been for dollar strength, but it is much more finely balanced now,” Elsa Lignos, senior currency strategist at RBC Capital Markets said. “The reaction (to Bernanke) seems much more likely to be influenced by flows and technicals than the fundamental outlook,” she said.
The dollar’s moves were also seen limited by expectations that minutes from the last Fed rate setting meeting, due for release at 1800 GMT, will underscore the wide divergence between policymakers on the future of the bank’s $85 billion a month bond buying plan. “Bernanke’s comments could see the dollar ease somewhat. But the Fed minutes are likely to be hawkish, so we expect the dol- lar to regain ground, especially against the yen,” Marcus Hettinger, currency strategist at Credit Suisse said.
Ten-year German bond yields were down two basis points at 1.39 percent, in line with a firmer tone to US Treasury prices that were being supported by the signs the Fed will stick with its asset purchase plan for now.
SHARES PAUSE
Having rallied to multi-year highs on policy stimulus from the Fed and other major central banks, world stock markets were mixed yesterday with MSCI’s world equity index unchanged by the mid session in Europe. The pan-European FTSEurofirst 300 share index, which has risen to a 5-year peak this month, eased 0.5 percent to 1,249 points while the euro-zone’s blue-chip Euro STOXX 50 index was 0.3 percent lower. Earlier Japan’s Nikkei climbed 1.6 percent to a 5-1/2 year high after the Bank of Japan, as widely expected, maintained an aggressively loose policy that will inject up to $1.4 trillion into the financial system. That kept the yen on the back foot against the dollar, which gained 0.4 percent to 102.85 yen. MSCI’s broadest index of AsiaPacific shares outside Japan eased 0.1 percent.— Reuters