NEW YORK: The dollar fell across the board on Thursday as improved risk sentiment in global financial markets erased all the gains it notched in the previous session after the US Federal Reserve flagged plans to reel in 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.
“Commodity currencies are broadly higher while havens are weaker, leaving the USD trading generally lower after a firm close following the FOMC (Federal Open Market Committee),” Shaun Osborne, chief currency strategist at Scotiabank, said in a note.
The US Dollar Currency Index, which measures the greenback against a basket of six rivals, was 0.5% lower at 93.015. The index, which had risen 0.3% on Wednesday, 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 1.2%.
On Wednesday, the Federal Reserve said it will likely begin reducing its monthly bond purchases as soon as November and signalled 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.
Norway’s crown jumped to more than three-month highs versus the euro on Thursday after the central bank raised its benchmark interest rate and said more hikes will follow in the coming months.