Dollar slumps as risk appetite rebounds

Shafaq News / The dollar fell across the board on Thursday as improved risk sentiment in global financial markets wiped out its gains in the previous session after the U.S. Federal Reserve flagged plans to dial back its stimulus this year.

Investors' risk appetite improved after Beijing injected fresh cash into its financial system ahead of an $83.5 million bond coupon by embattled property giant Evergrande, at risk of becoming one of the world's largest-ever corporate defaults.

Worries about Evergrande's payment obligations and what systemic risks to China's financial system the property giant's difficulties pose have weighed on global financial risk sentiment in recent sessions

The U.S. Dollar Currency Index , which measures the greenback against a basket of six rivals, was 0.5% lower at 93.037. The index, which had risen 0.25% on Wednesday, was on pace for its biggest daily percentage drop in a month but remains close to the near 10-month high touched in late August.

The dollar found little support from data that showed the number of Americans filing new claims for jobless benefits unexpectedly rose last week amid a surge in California.

Thursday's improved mood boosted risk-sensitive commodity currencies, with the Australian dollar rising 0.9% and the New Zealand dollar up 1.0%.

The improved risk-appetite was reflected in Wall Street's major equity indexes, with the S&P 500 on track for a gain of more than 1% and its largest two-day percentage gain since late July.

On Wednesday, the Federal Reserve said it will likely begin reducing its monthly bond purchases as soon as November and signaled interest rate increases may follow more quickly than expected.

While positive for the dollar, the boost from the Fed's announcement was undercut by hawkish messages from several central banks in Europe, and as Norway became the first developed nation to raise rates.

Source: Reuters