Investors cheered efforts made by governments and policymakers to address the economic fallout from the coronavirus outbreak and global stock markets recovered.
In a move to stem a market meltdown, the Federal Reserve offered $1.5 trillion in short-term loans. This move signalled more aggressive action to stimulate the economy. Market participants said signs of dollar funding stress persist and policymakers probably need to do more.
The Fed meets next week and many analysts now expect the central bank to chop its own target policy rate, quite possibly to zero. The US Central bank wishes to give markets new guidance about how it plans to combat the economic fallout from the coronavirus.
The ECB on Thursday announced a stimulus package that provides loans to banks with rates as low as -0.75% and increases bond purchases. But it did not join its counterparts in the United States and Britain by cutting rates.
European stocks bounced back from their worst day ever. Signs of a U.S. stimulus package helped to soothe fears about an economic shock from the contagion.
World stocks and the price of oil bounced off their lows as central banks stepped in to ease a liquidity squeeze.
START TRADINGForex – Stock markets recovered globally
Expectations climbed that policymakers would provide stimulus to help contain the economic impact of the coronavirus outbreak.
The dollar advanced on Friday, posting sharp gains against the safe-haven yen as stock markets recovered globally.
In mid-morning trading, the dollar gained 2.2% against the yen to 106.94. It also rallied versus another safe haven, the Swiss franc, rising 0.9% to 0.9508 franc.
The Australian dollar bounced after getting mauled on Thursday as investors shunned riskier currencies that are linked to the global commodities trade.
Against a basket of currencies, the dollar rose 0.6% to 98.085.
The euro, meanwhile, nursed losses despite ECB policymakers trying to reassure markets. European assets sold off on Thursday after investors were underwhelmed by the bank’s stimulus measures. It was last down 0.5% at $1.1125.
The Canadian dollar strengthened against its U.S. counterpart on Friday, rebounding from a four-year low the day before. The Canadian dollar was trading 0.6% higher at 1.3835 to the greenback, or 72.28 U.S. cents. For the week, the loonie was on track to decline 2.9%, its biggest weekly decline since January 2015.
The pound also weakened 0.3% against the dollar to $1.2510.
Gold gained 1% on Friday but was still set for its worst week in more than three years after this week’s wider market sell-off forced investors to sell bullion to cover margin calls.
Spot gold, which dropped by as much as 4.5% on Thursday, was up 0.9% to $1,590.96 per ounce by 1224 GMT. For the week, it was down 5.2%, the biggest such fall since November 2016.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money