World stocks, dollar dip as investors turn wary after Fed

23 Dec 2015 | Author: | No comments yet »

Dollar rallies as investors cheer Fed decision.

Investors turned cautious on Friday about what a stronger dollar and weak commodity prices could mean for the world economy, as a clutch of central banks moved to cushion the impact of the first U.S. rate rise in nearly a decade. Federal Reserve enacted a long-expected hike on Wednesday started to fade, as falls in global stocks and emerging markets showed that the move might not pass off as smoothly as hoped. European shares fell back from a one-week high reached in the previous session, taking their cue from earlier slips in Asia and on Wall Street, as oil prices headed for their third consecutive week of losses. “I am still quite bearish about the prospects for the first quarter of next year. The dollar traded at ¥122.71 late Thursday in New York, its highest level in a week, USDJPY, -0.85% compared with ¥122.22 late Wednesday in New York.

Debt markets built on gains made on Thursday, with bets that the Fed will make fewer rate rises next year than it is currently projecting, reflecting bigger concerns about the economy and doubts about significant inflation. Argentina’s peso lost nearly a third of its value against the dollar a day after the country’s new government said it would lift currency controls. In Europe, Spanish bonds lagged in a broad rally on Friday ahead of an uncertain national election, with the country’s traditional system of two-party dominance facing an unprecedented challenge from populist movements. The European Central Bank earlier this month cut interest rates and extended its bond-buying program by six months, underscoring the contrast in its monetary policy with the U.S. counterpart, even though its stimulus fell short of investors’ expectations.

Against a basket of other major currencies, the dollar was up 1.5 per cent, on track for its best week in five though it took a slight knock on Friday.

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