The dollar took a tumble and Asian stocks rose to one-year highs on Wednesday after surprisingly weak USA services sector activity put paid to already slim chances of an interest rate hike by the Federal Reserve as early as this month.
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The Institute for Supply Management said its U.S. non-manufacturing purchasing managers’ index (PMI) dived in August to its lowest level in more than six years.
Banks, for whom rock-bottom interest rates promise tough times, initially fell before turning slightly positive. The US dollar remains on the backfoot as the chances of a Fed rate hike in September have diminished even further, he added.
The dollar fell against the yen and most of the other major currencies on Wednesday as weak US service sector data clouded the economic outlook and raised doubts over whether the Federal Reserve will raise interest rates this year.
“Two per cent was not given to us on a stone tablet”, Williams said.
The spot gold price stayed supported during Asian trading hours on Wednesday after weak United States data sank the USA dollar alongside expectations of a September Fed rate hike.
“The obsession with a Fed rate hike has developed over the last couple of years, starting with the central bank wanting to begin the tightening process at a time that many in the markets believed was wrong, to now being in a position when its credibility is constantly being called into question”, Craig Erlam, senior market analyst at Oanda told CNBC via email.
In the currency market, the dollar fell more than 1 percent against the yen, euro, pound, Australian dollar and other major currencies during the US Tuesday session.
The yen gained additional support from a media report that the Bank of Japan’s board is struggling to agree on a common front in its planned policy review.
Spot gold was up 0.1 per cent at $1,351.10 per ounce by 0643 GMT. The Stoxx 600 index edged up 0.1 percent towards eight-month highs hit on Monday, led by a rise of nearly 1 percent in oil and gas shares. It rose as high as $49.40 on Monday, having fallen to $45.32 on September 1.
The dollar has taken a major beating this week after several United States economic data surprised the market to the downside. It was last down 0.2 per cent at US$0.7668 after GDP data largely met expectations, with Australia’s annual growth clocking its fastest pace in four years last quarter, clinching a remarkable run of 25 years without recession.
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West Texas Intermediate was up 0.2 percent at $44.91 and Brent added 0.3 percent to $47.39, although gains were limited as traders grow sceptical that a meeting between Russian Federation and OPEC this month will result in any deal to limit output.
