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ASIAN STOCKS RISE, DOLLAR SLUMPS

Asian stocks were boosted by the promise of ultra-easy monetary policy globally as the US Federal Reserve left interest rates near zero to support the country’s virus-battered economy, sending the dollar to a two-year trough, Swati Pandey wrote for Reuters on July 30, 2020.

All Fed members voted to leave the target range for short-term rates between 0% and 0.25%, where it has been since March 15 when the virus was beginning to hit the nation. The unchanged policy setting together with a pledge the Fed would use its "full range of tools" if needed boosted risk appetite overnight with all three Wall Street indexes finishing firmer. The confidence extended in Asia where Japan's Nikkei .N225 and South Korea's KOSPI .KS11 were up 0.3% each, Australia's main index climbed 0.7% and Hong Kong's Hang Seng index .HSI rose 0.2%. Chinese shares were a shade firmer, leaving MSCI’s broadest index of Asia Pacific shares outside of Japan .MIAPJ0000PUS up 0.4%.


“There is no doubt that the Fed’s large presence in markets has provided risk assets with a backstop to stop a tightening in financial conditions,” said Perpetual analyst Matthew Sherwood. “But they (Fed) don’t have any tools to engineer a recovery, which means that fiscal policy will need to remain in place to support household incomes, especially as unemployment could increase in the months ahead as the true impact of the shock on the labor market is revealed.”


In currencies, the biggest mover was the greenback. The dollar =USD has been tumbling on expectations the Fed will continue its ultra-loose monetary policy for years to come and on speculation it will allow inflation to run higher than it has previously indicated before raising interest rates. Wednesday’s Fed move sent the dollar index crashing to 93.17, the weakest since June 2018. It recouped some of the losses and was last at 93.398.


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