Asian stocks rebound as investors take heart from US pledge

While governments around the globe are launching ever-larger fiscal stimulus packages, the latest US effort remains stalled in the Senate as Democrats said it contained too little money for hospitals and not enough limits on funds for big business.

The logjam combined with the stimulus splash from the Fed to take a little of the shine off the US dollar, though it remains in demand as a global store of liquidity.

“The special role of the USD in the world’s financial system — it is used globally in a range of transactions such as commodity pricing, bond issuance and international bank lending — means USD liquidity is at a premium,” said CBA economist Joseph Capurso.

“While liquidity is an issue, the USD will remain strong.”

For now, the prospect of huge US dollar funding from the Fed saw the currency ease back to ¥110.38 from Monday’s one-month top of 111.56.

The euro bounced 0.8% to $1.0805, up from a three-year trough of $1.0635. The dollar index slipped 0.4% to 101.720 and off a three-year peak of 102.99.

Commodity and emerging market currencies that suffered most during the recent asset rout, also benefited from the Fed’s steadying hand. The Australian dollar climbed 1.5% to $0.5915 and away from a 17-year low of $0.5510.

Gold surged in the wake of the Fed’s promise of yet more cheap money, and was last up 1.7% at $1,578.45 an ounce having rallied from a low of $1,484.65 on Monday.

Oil prices also bounced after recent savage losses, with US crude up $1.09 at $24.45 barrel. Brent crude firmed 97c to $28.00.

Reuters