FOREX-Dollar slumps as risk appetite rebounds

BY Reuters | ECONOMIC | 09/23/21 03:41 PM EDT
       * Dollar index down 0.5%
    * Norway becomes first developed central bank to hike rates

 (Updates prices)
    By Saqib Iqbal Ahmed and Chuck Mikolajczak
    NEW YORK, Sept 23 (Reuters) - The dollar fell across the board on Thursday as improved risk sentiment in
global financial markets wiped out its gains in the previous session after the U.S. Federal Reserve flagged
plans to dial back its 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 U.S. Dollar Currency Index, which measures the greenback against a basket of six rivals, was
0.5% lower at 93.037. The index, which had risen 0.25% on Wednesday, was on pace for its biggest daily
percentage drop in a month but remains close to the near 10-month high touched in late August.
    The offshore Chinese yuan strengthened versus the greenback at 6.4599 per dollar.
    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 1.0%.
    The improved risk-appetite was reflected in Wall Street's major equity indexes, with the S&P 500
on track for a gain of more than 1% and its largest two-day percentage gain since late July.
    On Wednesday, the Federal Reserve said it will likely begin reducing its monthly bond purchases as soon
as November and signaled 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 a 3-1/2 month high versus the euro on Thursday after the central bank raised
its benchmark interest rate and said more hikes will follow in the coming months.
    Sterling extended its rise on Thursday after the Bank of England said two of its policymakers had voted
for an early end to pandemic-era government bond buying and markets brought forward their expectations for
an interest rate rise to March.
    In emerging markets, the Turkish lira plummeted to a record low after a surprise interest rate cut of
100 basis points to 18% that came despite inflation hitting 19.25% last month
    Meanwhile, bitcoin extended its recovery from a sharp fall earlier this week, rising 2.42% to a 3-day
high of $44,642.78.

    Currency bid prices at 3:30PM (1930 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change
 Dollar index                 93.0320        93.4920     -0.49%         3.391%        +93.5260    +92.9770
 Euro/Dollar                  $1.1746        $1.1687     +0.51%         -3.86%        +$1.1750    +$1.1684
 Dollar/Yen                   110.2550       109.8150    +0.40%         +6.71%        +110.2550   +109.7550
 Euro/Yen                     129.49         128.34      +0.90%         +2.02%        +129.5100   +128.3400
 Dollar/Swiss                 0.9238         0.9261      -0.24%         +4.43%        +0.9273     +0.9218
 Sterling/Dollar              $1.3731        $1.3620     +0.83%         +0.52%        +$1.3750    +$1.3615
 Dollar/Canadian              1.2649         1.2773      -0.96%         -0.66%        +1.2796     +1.2634
 Aussie/Dollar                $0.7305        $0.7242     +0.88%         -5.04%        +$0.7315    +$0.7223
 Euro/Swiss                   1.0852         1.0822      +0.28%         +0.42%        +1.0853     +1.0823
 Euro/Sterling                0.8552         0.8581      -0.34%         -4.31%        +0.8590     +0.8537
 NZ                           $0.7075        $0.7005     +0.96%         -1.52%        +$0.7093    +$0.6982
 Dollar/Norway                8.5650         8.6555      -1.05%         -0.26%        +8.6790     +8.5595
 Euro/Norway                  10.0618        10.1226     -0.60%         -3.87%        +10.1469    +10.0479
 Dollar/Sweden                8.6198         8.6925      -0.44%         +5.17%        +8.7014     +8.6173
 Euro/Sweden                  10.1252        10.1700     -0.44%         +0.48%        +10.1745    +10.1240

 (Reporting by Saqib Iqbal Ahmed and Chuck Mikolajczak; Additional reporting Sujata Rao and Saikat
Chatterjee in London and Tom Westbrook in Singapore; Editing by Bernadette Baum, Will Dunham and Hugh

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.