LONDON: The dollar held just below a four-year high against a basket of currencies yesterday, fuelled by the biggest yield advantage over the euro in nearly 15 years as the Federal Reserve contemplates hiking interest rates.
European equities shrugged off a sharp sell-off in Asian and US markets overnight, clawing off one-month lows and led by euro zone banks, seen as the big winners of the European Central Bank’s measures to prop up inflation and kick-start growth.
US stock index futures pointed to a slightly firmer start on Wall Street after Thursday’s sharp selloff triggered by Apple Inc and the rallying dollar.
The dollar index, which tracks the greenback against a basket of major currencies, edged up to 85.278, not far from a four-year high of 85.485 hit on Thursday.
The dollar is on track for its 11th successive weekly rise, something it has not achieved in four decades. “It’s Friday and so we may see some consolidation, but in general the dollar has broken through a number of long-term levels, so there’s scope for us to go further before we meet much resistance,” said Neil Mellor, a strategist with Bank of New York Mellon in London.
“Against the euro we have a forecast in the low $1.20s for a year’s time, but the way things are going we could get there fairly quickly.”
The dollar has been driven higher by the divergent monetary policy outlooks between a rate-hike-contemplating Fed and an ECB and Bank of Japan that are mulling further stimulus.
S&P raises India outlook
MUMBAI: Ratings agency Standard & Poor’s raised India’s credit outlook to “stable” Friday, saying the prospects for economic reforms had grown under Prime Minister Narendra Modi’s new right-wing government.
Although S&P kept its main sovereign credit rating unchanged at “BBB-“, the agency said it was “revising the outlook on the long-term rating to stable from negative” as it expected growth rates to pick up pace.
“The stable outlook reflects our expectation that the newly elected government will be able to implement reforms that spur growth, which in turn improves fiscal performance,” it said in a statement. “India’s improved political setting offers a conducive environment for reforms, which could boost growth prospects and improve fiscal management,” it added.
The announcement comes a day after the Asian Development Bank also expressed hope of a “turnaround” in India’s economy under Modi who coasted to victory in May’s general election on a pro-business platform.
Modi is beginning his first visit this weekend to the United States since his election, a trip which is largely focused on boosting trade and attracting investment.
India’s economy expanded 5.7 percent in the first quarter of the financial year, the best quarterly performance in over two years. A sharp narrowing of its current account deficit—the broadest measure of trade—also boosted investor sentiment.
But despite winning the biggest mandate in 30 years, Modi’s Bharatiya Janata Party (BJP) government is yet to introduce big-ticket reforms that analysts say are needed to really fire up growth.
Agencies
