Dollar hits five-week low on Fed caution, Wall St recovers

NEW YORK Fri Jul 26, 2013 4:51pm EDT

1 of 10. Traders work on the floor at the New York Stock Exchange, July 24, 2013.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - The dollar fell to a five-week low on Friday on expectations the Federal Reserve will underline its intention to keep interest rates low for a long time at its upcoming policy meeting, while U.S. stocks managed to recover late in the day to end with a slim gain.

Gold also erased losses late in the session, racking up its third week of gains. But oil, which typically benefits from a weaker dollar, slipped on worries about falling demand in China, the world's second-largest energy consumer.

The dollar has tumbled this month as Fed officials have moved to soothe concerns about plans to withdraw stimulus.

A Wall Street Journal report published online on Thursday contributed to the greenback's latest fall. It said the Fed, which will begin a two-day policy meeting on Tuesday, may debate tweaking its forward guidance message to hammer home that it will not raise rates any time soon.

The dollar was down 0.4 percent against a basket of currencies .DXY. The greenback earlier hit 81.548, its lowest since June 20 and just above chart support at 81.506, its 200-day moving average.

In addition to the Fed's meeting, the market's tone next week could be determined by a round of U.S. economic indicators, culminating in the government's monthly report on non-farm payrolls on Friday.

"Folks are just treading water. They just want to see the big numbers next week to get some directional guidance," said Samarjit Shankar, director of market strategy at BNY Mellon in Boston.

The dollar's slide began on July 10, when minutes of the Fed's June meeting gave investors second thoughts about when the U.S. central bank would start reducing stimulus.

Last month the Fed said it expects to start slowing the pace of its $85 billion in monthly bond purchases later this year. Chairman Ben Bernanke has since stressed that the timeline is not set in stone and could change if the economic outlook shifts, comments that soothed Wall Street and the bond market.

The dollar's weakness pushed the euro to a five-week high of $1.3296. But it erased gains to last trade at $1.3273, slightly lower on the day.

U.S. stocks bounced back from early declines to end little changed as investors weighed corporate earnings season and the expected path of monetary policy. Among the major companies to report, shares of (AMZN.O) were up 2.9 percent and closed at a record.

The company reported a second-quarter loss on Thursday but its domestic business expanded quickly. More than a half dozen investment banks raised their share price targets on Amazon on Friday.

With the S&P 500 up more than 18 percent for the year, Friday had provided an opportunity for modest profit-taking.

"I was surprised we ended up, but people have a sense of optimism about the market," said Matt McCormick, a money manager at Cincinnati-based Bahl & Gaynor Inc.

"The bad news from the morning was digested and discarded. Earnings haven't been as bad as people expected and the political issues aren't in the forefront right now. That could change at any moment, but enjoy the summer rally while you can."

Still, the S&P was slightly lower for the week, making it the first week in five the benchmark has declined. The index is up 5.3 percent so far this month, putting it on track to be the best month since October 2011. The Nasdaq is up 6.2 percent for July so far, its best monthly gain in a year and half.

The Dow Jones industrial average .DJI edged up 3.22 points, or 0.02 percent, at 15,558.83. The Standard & Poor's 500 Index .SPX added 1.40 points, or 0.08 percent, to 1,691.65. The Nasdaq Composite Index .IXIC gained 7.98 points, or 0.22 percent, to 3,613.16.

The benchmark 10-year U.S. Treasury note was up 4/32, the yield at 2.5643 percent.

The pan-regional FTSEurofirst 300 .FTEU3 closed down 0.3 percent, its first weekly drop in over a month. World stocks .MIWO00000PUS slipped 0.1 percent.

Nevertheless, it was a milestone day for Europe, marking one year since ECB President Mario Draghi's "Whatever it takes" speech that turned the tide in the euro zone debt crisis.

Italy and Spain have seen their two-year bond yields fall from 5 and 6.4 percent, respectively, before Draghi's speech, to under 2 percent, saving them immense amounts in interest payments.

Spot gold cut early losses and was off 0.01 percent on the day at $1,332.86 per ounce as buyers cashed in on the day's $1,340 peak, up around $150 from the three-year low hit on June 28.

Brent futures for September dropped 48 cents to $107.17 per barrel after posting a 46-cent gain on Thursday. U.S. light crude for September settled down 79 cents at $104.70 a barrel.

Oil prices were dampened by worries over demand from China after China's industry ministry ordered companies across 19 industries to close outdated capacity by the end of September.

(Additional reporting by Wanfeng Zhou and Ryan Vlastelica in New York, Marc Jones in London; Editing by Dan Grebler)

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Comments (5)
JoeObserver wrote:
Fed seen QE tapering in september according to bloomberg survey amid fear that Larry Summers could replace Bernanke as the Fed Chairman.

Jul 26, 2013 9:41am EDT  --  Report as abuse
jrj906202 wrote:
Who cares,what the Fed says?Watch what they do.The Fed is just another political wing of the govt.We live in a country,where most look to govt to take care of them and all fix problems.As long as the govt runs deficits,the Fed will monetize them and devalue the currency.Nothing new.Been going on for decades.The higher the deficit becomes,the faster the fiat currency declines.

Jul 26, 2013 12:32pm EDT  --  Report as abuse
The dollar has fallen because speculators have discovered it is dangerous to your health to print them on 3D — very dangerous. That means people won’t do it as much anymore but now that everybody knows that colossal amounts of dollars have been printed, down goes the greenback. (humor)

3D is also dangerous to people and the environment — very dangerous to both.

Says a SmartPlanet Daily story: Before you buy that amazing desktop 3D printer, know this: that mini-factory-in-a-box could be harmful to your health.

Researchers from the Illinois Institute of Technology have found, for the first time, that commercially available desktop 3D printers — which are now cheaper and easier than ever to purchase for your home or office — are “high emitters” of ultrafine particles.

But while the two different types of 3D printers that were tested can both be considered “high emitters,” as points out, one type is expelling more indoor air pollution than the other. It’s the higher temperature 3D printer that uses acrylonitrile butadiene styrene (ABS) feedstock that puts out 200 billion particles per minute when in use. The other 3D printer tested used lower temperature polylactic acid (PLA) feedstock and put out about 20 billion particles per minute.

Either way, the elevated levels of ultrafine particles have serious health implications from “cardio-respiratory mortality” to stroke to asthma symptoms.

The problem is that, unlike a factory setting, 3D printers that are sold for homes are standalone devices without ventilation systems or filtration accessories to limit indoor air pollution. As the researchers put it: “These results suggests caution should be used when operating some commercially available 3D printers in unvented or inadequately filtered indoor environments.”

That could at least slow down the idea that 3D printers will soon become a fixture on all our desks. And while it’s been a good year for desktop 3D printers, this news could take the shine out of that newly printed plastic prototype.

Jul 26, 2013 12:58pm EDT  --  Report as abuse
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