The currency got an immediate boost in the early hours of Thursday when the US Federal Reserve left interest rates unchanged, as widely expected.
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The Dow Jones industrial average added 163.74 points, or 0.9 percent, to 18,293.70.
All 11 major S&P sectors closed in positive territory, led by a 1.9-per cent gain for the real estate sector.
“LME metals precious metals and oil all benefitted from the resulting weakness in the dollar and stock markets continued to march higher”, Sucden Financial said.
Miners were also under pressure on Friday with the STOXX Basic Resources down 1 percent after touching in the previous session its highest level since August 2015.
The euro fetched $1.1197, recovering from Wednesday’s three-week low of $1.1123.
Trading followed a pattern that has become familiar in the last several months.
Chair Janet Yellen and her colleagues at the Federal Reserve didn’t surprise anyone when they announced Wednesday they were not raising their benchmark interest rate.
The index is down over 5 percent so far this year but was on course to end the week with a gain of more than 2 percent.
“It’s another example of the issues facing investors right now, particularly pension funds and retirement funds, that they are all chasing yield in the same places”, said Ian Winer, co-head of equities trading at Wedbush Securities. However three members also indicated they do not want any hikes this year.
Well, we certainly have a number of answers and if we assess price action it seems that many are now happy to invest in Japanese banks and while the Fed have given as strong a signal of a hike in the December meeting, United States stocks still soared. That’s why the last meeting of the year in December is seen as the most likely time for the next rate hike as long as the economy keeps improving in line with the Fed’s expectations.
Yellen said the Fed is trying to “decide what the best policy is to foster price stability and maximum employment to manage the variety of risks that we see as affecting the outlook”. Meanwhile, central banks overseas are likely to continue their aggressive stimulus programs in some form, keeping bond yields down globally and continuing to make USA fixed income a relatively attractive investment.
HSBC’s bond strategist are forecasting that 10-year Treasury yields will fall back to 1.6%-a so far, spot-on prediction. A declining dollar and a drawdown in USA crude inventories helped boost the oil market ahead of a meeting of major oil producers. In other energy commodities, heating oil rose 2.5 cents to $1.45 a gallon, wholesale gasoline rose less than 1 cent to $1.40 a gallon and natural gas fell 7 cents to $2.99 per 1,000 cubic feet.
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“A necessary condition for the dollar to rally is a more consistent pickup in U.S. data so the market can price a faster pace of hikes in 2017/18”, they wrote.
