The dollar slumped again against the yen yesterday in the wake of minutes from the last US Federal Reserve meeting and expectations the Bank of Japan was unlikely to intervene, while global growth concerns weighed on equities.
Investors were set to monitor an appearance by Janet Yellen at 5.30pm EDT (21:30 GMT) in a conversation with former Federal Reserve chairmen. On Wednesday, meeting minutes indicated the Fed is unlikely to raise interest rates before June, as a number of policymakers argued headwinds to growth would probably persist.
A cautious Fed and concerns about global growth sent the dollar to a 17-month low of 107.67 against the yen. An optimistic economic outlook from the BOJ also diminished expectations the central bank would take additional monetary easing steps.
The dollar was last down 1.4 per cent at 108.01, its biggest daily per centage drop in two months. The decline put the greenback’s losses at about 10 per cent for the year.
The surge of money into the perceived safety of the Japanese currency reflects the scale of concern over global growth that has kept the Fed from proceeding with another rate hike.
That concern also sent equities lower, with each of the 10 major sectors on Wall Street in the red, while the pan-European FTSEurofirst 300 share index was on track for its fourth straight week of declines.
The Dow Jones industrial average fell 119.2 points, or 0.67 per cent, to 17,596.85, the S&P 500 lost 18.24 points, or 0.88 per cent, to 2,048.42 and the Nasdaq Composite dropped 48.80 points, or 0.99 per cent, to 4,871.92.
MSCI’s index of world shares fell 0.57 per cent. The FTSEurofirst 300 closed down 0.76 per cent, hurt by a drop of more than two per cent in financials.
The dollar index, which measures the greenback against a basket of six major currencies, was up 0.17 per cent at 94.594.
The US dollar rally that began in mid-2014 has nearly run its course and will only gain slightly over the coming year, according to a Reuters poll of strategists who said risks to their forecasts are tilted more to the downside.
The concerns over debt and growth-related risks to companies worldwide, particularly in developing economies, were also visible in minutes of the European Central Bank’s March policy meeting.
The lower dollar and growth concerns boosted demand for safe-haven assets such as gold and US Treasuries.
Gold was up 1.2 per cent at $1,236.60 an ounce after hitting a two-week high of $1.243.50.
US Treasury yields fell broadly to their lowest levels since late February. Benchmark 10-year Treasuries rose 15/32 in price to yield 1.7027 per cent after hitting a low of 1.694 per cent.
Oil prices also declined after industry data suggested a key pipeline shutdown had not reduced crude flows to the US storage base by as much as expected.
US crude was last off 2.1 per cent to $36.97 a barrel while Brent fell 1.7 per cent to $39.16 a barrel.