Equity markets in Europe were mixed on Thursday as the dollar continued to weaken.
Traders were sending the dollar lower for essentially the same reason that equity markets have been buoyant — the expectations the Federal Reserve will start buying government bonds to try to stimulate the sluggish American economy. Buying bonds would drive down interest rates from already low levels. Gold prices rose, as investors again sought a safe return.
The dollar-selling accelerated in Asia after Singapore’s surprise decision to widen the trading band of the Singapore dollar. The island nation’s central bank, known as the Monetary Authority of Singapore, said Thursday that it would continue with a “modest and gradual” appreciation of the Singapore dollar. The move means that Singapore will let the local currency appreciate to cope with global market volatility.
The dollar slid below 80 yen Thursday as the euro rose to $1.40. The British pound strengthened and the dollar with neared parity with the Australian currency.
In European equity markets, indexes mostly rose as investors remained buoyed by the prospect of another monetary stimulus from Fed. The DAX in Frankfurt was up 32.33 points, or 0.5 percent, while the CAC-40 in France was up 4.92 or 0.13 percent. The FTSE 100 index in London was down 9.59 or 0.17 percent.
Indexes on Wall Street are expected to open higher on Thursday. Traders will get their weekly look at first-time claims for unemployment benefits. Last week’s report showed claims were at their lowest level since mid-July, but still not low enough to signal broad hiring. High unemployment remains a key obstacle to a stronger economy and any Fed action would be partially aimed at reviving job growth.
Low inflation is also a concern for the Fed. At its meeting last month, the Fed hinted that future bond purchases would help get inflation back to more historically normal levels. The lower interest rates are also aimed at sparking new borrowing and spending by companies and consumers. More spending would drive prices for goods higher.
Economists polled by Thomson Reuters forecast the Producer Price Index, a measure of the cost of goods before they reach consumers, rose 0.2 percent last month. Excluding volatile food and energy spending, costs likely rose 0.1 percent.
Still, those reports are expected to take a backseat to what the Fed is planning to do at its next rate-setting meeting in early November to shore up the economy and prevent prices from falling. The minutes to the last meeting of the Federal Open Market Committee gave a big hint that the Fed is planning another monetary stimulus, that could involve the setting of an inflation target.
Traders will keep a close eye on the Fed chairman Ben S. Bernanke on Friday when he delivers a speech on monetary policy, more or less at the same time as monthly inflation figures are set to show price pressures in the economy remain subdued.
Analysts said it was no longer a question of if but how and how much money the Fed will pump into the United States economy.
Earlier in Japan, stocks joined in the global rally and the benchmark Nikkei 225 stock index jumped 180 points, or 1.9 percent, to 9,583.51. Hong Kong’s Hang Seng index added 1.68 percent and closed at 23,852.17.
