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Dollar falls as Asian stocks and US futures rise

Asian stocks and US futures rose on Tuesday as the dollar weakened against other currencies and investors returned to a strong stock market after some profit-taking selling in the previous session.

Stocks tracking the Wall Street benchmark S&P 500 rose 0.7%, while stocks tracking the tech-heavy Nasdaq 100 rose 1.2%.US stock market fell on monday After a spike late last week.

Meanwhile, the Asian market is dominated by Xi Jinping and Joe Biden. improve US-China relations At Monday’s meeting ahead of the G20 summit in Indonesia, Beijing moved to ease some pandemic controls.

The dollar index, which tracks the currency against six other currencies, fell 0.7%, continuing its decline since its peak in September.

Rabobank foreign exchange analysts said the dollar is unlikely to fall significantly if the US Federal Reserve keeps rates on hold “for longer” in its fight against inflation.

In the Treasury market, the two-year US Treasury yield fell by 0.06 points to 4.34%. Yields on benchmark 10-year Treasuries also fell 0.06 percentage points to 3.8%. As prices rise, yields fall.

The change in sentiment came after last week’s US consumer price index fell short of economists’ expectations, boosting US stock markets. S&P 500 rose 5.5% On Thursday — and pull the dollar down. October inflation data forced the Fed to raise rates by 0.75 percentage points for the fifth time in a row at its December meeting.

But some analysts think investors are being unduly optimistic.

Analysts at Goldman Sachs believe the recent rally in fixed income and risky assets is “likely overdone,” adding that “in bear markets, the S&P 500 tends to see daily returns above 2%.” There is,” he said.

“A stronger-than-expected reset of inflation could help slow the pace of rate hikes, but the risk of an extended rate hike cycle remains,” the bank added.

Federal Reserve Vice Chairman Lael Brainard said: said on monday The slow pace of interest rate rises does not mean central banks are weakening their efforts to combat historically high inflation.

“We have done a lot, but additional work needs to be done, both on rate hikes and on keeping inflation under control, to bring inflation down to 2% over time,” he said, referring to the October inflation rate. He added that it was “encouraging” that the rate was better than expected, but that it was “preliminary”.

Mike Zigmont, head of trading and research at Harvest Volatility Management, said the debate over whether the recent rally in equities was the beginning of a true bull market, or just a bear market rally, has been driven by fresh economic news. argued that it is mostly redundant because there is none.

“Let’s accept that investors are confused, but they’re not scared,” said Zigmont. “They just got a ton of relief. [from the latest CPI data] And now they are adjusting to their new surroundings. ”

Meanwhile, Bank of America’s latest Global Fund Manager Survey reveals that 92% of those surveyed expect stagflation (low growth and high inflation) to occur in 2023.

In Asia, Hong Kong’s Hang Seng Index rose 4.1%, up a quarter from its late October low. China’s CSI 300 was up 1.9%, Japan’s Topix was up 0.4%, and South Korea’s Kospi was up 0.2%.

The regional STOXX Europe 600 was up 0.1% in early trading, while London’s FTSE was up by the same margin.

https://www.ft.com/content/d7e03a3b-61aa-4db2-8951-80f77786d30b Dollar falls as Asian stocks and US futures rise

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