Dollar low at 3-yr on Fed outlook, silver glitters

8:07 PM

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Dollar low at 3-yr on Fed outlook, silver glitters

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The dollar floundered at 3-year lows against a basket of currencies on Friday as players ratcheted up bets on the Fed's ultra-easy monetary stance, sending commodities like silver to a record high and keeping stocks well supported.

Silver and gold prices scored fresh records benefiting from inflation concerns as a result of the Fed's ultra-loose policy even though demand for risky assets rose.

With a fresh batch of US economic data in the form of rising claims for jobless benefits also offering no succour to the ailing dollar, the greenback's index, which tracks its performance against a basket of major currencies, fell to its lowest level since July 2008 before recovering somewhat. It is down 1.4% so far this week, poised for its worst week since January 22.

"The likely indicator of a reversal in the USD's ($) (mis)fortunes is global equities. A sustained bout of profit-taking would assuredly spillover into foreign exchange markets, with the EUR and AUD returning back to earth," said Michael Woolfolk, strategist at BNY Bellon.

That reversal seemed unlikely for now with world equities up by some 5% in the past two weeks while Asian stocks outside Japan hovering just below a three-year peak.

On Friday, Asian stocks are set to add to this week's robust gains, tracking yet another strong showing from Wall Street which received a boost from the Dow Jones transports index.

Earnings on Wall Street disappointed somewhat with US-listed shares of Research in Motion tumbling 10% after the BlackBerry-maker cut its earnings outlook for the current quarter, while Procter & Gamble Co lowered the high end of its profit forecast as it took steps to offset price pressures.

Weak US economic data meant bonds had yet another good day with benchmark ten-year US yields steadying near 3.32% after falling by more than a quarter-point from this month's highs.

Trading in Asia is expected to be subdued on Friday with Japanese financial markets shut for a public holiday while UK markets will also be closed for the royal wedding. On Monday, many centres in Asia will be shut for the Labour Day holiday.