Fed's Caution Propels Euro to One-Month High

The dollar index, which tracks the greenback against a basket of six trade-weighted peers, retreated 0.2 percent to 100.18.

Most Asian equities followed USA stocks higher, after Treasuries rallied and the USA dollar tumbled as the Federal Reserve raised interest rates without accelerating its timeline for future tightening. The Nasdaq was flat, while the Dow and the S&P 500 posted losses.

Earlier, the pan-European STOXX 600 index gained 0.4 percent, helped by energy and basic resource stocks.

The dollar dropped roughly 1% after the Fed announcement and continued lower on Thursday.

With an immediate US rate increase seen as a done deal, investors are focusing on what message the central bank will deliver when it concludes a two-day meeting on Wednesday.

Nevertheless, since the start of the year investors have traded French government debt at a heavier discount from ultrasafe German bonds, which means they are still distrustful of polls after last year's decision by Britain to leave the European Union and Donald Trump's victory in the USA, both of which came as a surprise.

Seoul advanced 0.8 percent, Sydney ticked up 0.2 percent and Singapore was 0.8 percent higher, while there were also big gains in Wellington, Taipei, Jakarta and Manila.

On currency markets the pound edged up after hitting an eight-week low in NY as Britain prepares to trigger its exit from the European Union.

The euro touched its highest level in 5-1/2-weeks on Friday.

Investors were expecting four rate hikes in 2017.

Markets also reacted positively after Dutch center-right Prime Minister Mark Rutte fought off a challenge by anti-immigration, anti-European Union rival Geert Wilders to score an election win seen as a victory against populist nationalism. Sterling managed to pull away from a two-month low of $1.2110 struck Tuesday on fears of prolonged political jousting over Brexit terms.

Financial stocks were broadly higher, as French lender Societe Generale (PA:SOGN) rose 0.20%, while Germany's Deutsche Bank (DE:DBKGn) and Commerzbank (DE:CBKG) rallied 0.99% and 2.07%. It was fractionally higher at $1.07715 in early trade, after two days of strong gains, and set to end the week up 0.9 percent. Prices plummeted at the beginning of the month as the cut in production from OPEC countries has been countered by higher stockpiles of crude in the U.S. The Brent crude benchmark was near $52 per barrel while WTI crude remained below $50/bbl. USA crude touched its lowest level in more than three months early this week on concerns about a supply glut in the United States, but data on Wednesday showing a small decline in US stockpiles helped lift prices. It was poised to gain 1.9 percent for the week, its first in three, driven by the Fed's more moderate monetary policy stance.

  • Zachary Reyes