Friday, 24 September, 2021
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Global stocks slide as yen, euro gains question policy potency

Global stocks slide as yen, euro gains question policy potency

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LONDON: The U.S. dollar slid to its lowest against major currencies in well over a year on Tuesday, a move led by the yen’s continued march higher as investors grew doubtful about central banks’ ability to boost growth through aggressive policy easing.
That did not stop Australia’s central bank surprising markets by cutting interest rates to a record low of 1.75 percent, however, hitting the currency but lifting the country’s shares, reports the Media.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell to a three-week low and the euro’s burst through US$1.16 for the first time in eight months pushed European shares deeply into the red.
Europe’s FTSE 300 index of leading 300 shares fell 1.3 percent and Germany’s DAX shed 1.7 percent , both the lowest in nearly three weeks. Shares in German lender Commerzbank were among the biggest decliners across Europe, down 7 percent after profits slumped in the first quarter.
Banks were among the biggest sectoral losers in Europe, down nearly 2 percent in early trading. Shares in Swiss bank UBS were down 6 percent after first quarter results.
“Since the all-time highs seen in the DAX in April last year the direction of travel has been that of a slow decline, and while we just about remain in positive territory for 2016, sentiment towards European markets continues to be markedly cautious,” said Michael Hewson, chief analyst at CMC Markets.
Analysts at Rabobank noted the dollar’s fall towards 105 yen from as high as 122 only a few months ago, a remarkable move that will do nothing to relieve the deflationary pressures in Japan and which reflects “the broader problem of unconventional monetary policy reaching its limits just like conventional policy already has”.
The yen rallied to 105.60 per dollar , its highest since October 2014, while the euro rose as high as US$1.1614 , a level not seen since August last year.
This pushed the dollar index , a measure of the dollar’s value against a basket of major currencies, down to 92.00. It was last there in January 2015.
The Japanese currency has appreciated 13 percent against the dollar this year, accelerating its ascent after the Bank of Japan stunned markets last week by keeping monetary policy unchanged in the face of growing headwinds for its economy.
Japan is in the middle of its Golden Week series of holidays. Markets were closed on Friday and will be closed from Tuesday to Thursday this week.