Fed softness knocks dollar, fails to lift Greece-focused Europe

Friday, 20 February 2015 00:00 - - {{hitsCtrl.values.hits}}

Traders are pictured at their desks in front of the DAX board at the Frankfurt stock exchange 18 February, 2015 – REUTERS Reuters: A softer stance from the Federal Reserves knocked the dollar down on Thursday but failed to lift stock markets in Europe, where the looming deadline for Greece to get a new debt deal kept investors nervous. In contrast, Japan’s shares hit a 15-year high as the minutes from the Fed’s meeting in January showed officials were concerned about hiking interest rates too soon. Export data also showed the weaker yen was helping the economy. Investors revised their expectations for the timing of a first Fed hike and the trajectory of rates for the next couple of years. The dollar fell about 0.2% against a basket of currencies. “Is this the U.S. joining in the currency wars?” said Marshall Gittler, head of global FX strategy at IronFX. In Europe, whose barely growing economy could benefit from a weaker currency, the euro rose 0.2% to $1.1412 and the broader FTSEurofirst 300 index slipped 0.3% to 1,511.18 points. The retreat from seven-year highs was accelerated by a slide in oil prices on expectations US inventories would reach record highs and a possible increase in Saudi output stoked new worries about oversupply. Brent crude futures for April fell below $60 a barrel, trading at $59.32 a barrel, down $1.21. Concerns about Greece, the country at the heart of the euro zone debt crisis for the past five years, also weighed. Athens is expected to seek an extension to its loan agreement with the euro zone, without which it could run out of cash in weeks. Euro zone officials said Athens had to agree to a deal by Friday. The European Central Bank did agree on Wednesday to raise to 68.3 billion euros ($78 billion) a cap on funding available under its Emergency Liquidity Assistance scheme, a person familiar with the ECB talks said. That was an increase of 3.3 billion euros, less than Athens had requested. The Greek uncertainty saw lower-rated euro zone debt underperform benchmark German Bunds, whose yields dropped two basis points to 0.36%. Italian and Spanish 10-year yields were unchanged at 1.63% and 1.59%, respectively. Portuguese equivalents dipped one bp to 2.32%. “Although it is slightly more probable that the Greek side will ultimately climb down ... there is still an undiminished risk of political miscalculation,” said DZ Bank strategist Daniel Lenz. Ten-year US T-note yields were down two basis points at 2.05%.

Oil falls sharply as US crude inventories rise

LONDON (Reuters): Oil prices tumbled on Thursday after another big weekly build in US crude inventories and a possible rise in Saudi output stoked worries about oversupply. US crude stocks rose by 14.3 million barrels last week, data from industry group the American Petroleum Institute (API) showed after Wednesday’s settlement, compared with analysts’ expectations for an increase of 3.2 million barrels. If US Energy Information Administration (EIA) data due at 1600 GMT confirms the large build, it would be the biggest weekly addition in barrels since such data became available in 1982. The API and EIA reports are a day late this week because of a US holiday on Monday. At 0843 GMT, benchmark Brent crude futures for April were down $1.67 at $58.86 a barrel, extending declines from Tuesday’s two-month high of $63. US crude for March delivery, which expires on Friday, was down $2.05 at $50.09 a barrel after dipping to an intraday low of $49.97. Trading was quiet in Asian hours as markets in China and other nations were closed for the Lunar New Year holidays.