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Hong Kong - The dollar dropped for a second day against all of its G-10 peers after weaker-than-expected US economic growth dimmed prospects for a Federal Reserve interest-rate hike.
Stocks slumped in Asia and Europe, while commodities were set for their biggest monthly gain since 2010.
The Bloomberg Dollar Spot Index sank to an 11-month low, while the yen was headed for its biggest weekly jump since 2008 after the Bank of Japan (BoJ) unexpectedly refrained from adding to record stimulus on Thursday.
Futures on the Nikkei 225 Stock Average dropped as Japanese financial markets shut for a holiday, while the Stoxx Europe 600 Index slid the most in three weeks. The greenback’s decline is proving a boon for raw materials, helping lift gold and silver to 15-month highs. Crude oil has jumped 20% this month to more than $46 a barrel.
The BOJ’s surprise decision capped a week of fence-sitting for central banks, with the Fed keeping interest rates steady for a third straight meeting and policy makers from New Zealand to Brazil also holding the line.
The European Central Bank maintained stimulus last week and economists have reined in forecasts for monetary easing in China.
The slowest pace of American economic expansion in two years reignited some concern over the global outlook, and pushed out bets on the potential timeline for tighter Fed policy.
"Central banks look like they have run out of bullets to a degree," said Mark Lister, head of private wealth research at Craig’s Investment Partners in Wellington, which manages about $7.2bn. "We’re getting to that point where there are limits to the results they can get from anything more they do. This points to a fragile outlook with still a lot of risks out there."
Germany’s retail sales fell in March from the previous month, while France’s economy expanded more than analysts forecast in the first quarter, data showed on Friday. The euro area will release figures for gross domestic product, inflation and unemployment, while US updates on consumer confidence and household spending are also due.
Russia’s central bank has a policy meeting and six out of 41 analysts surveyed by Bloomberg predict the benchmark interest rate will be cut. The remainder forecast no change.
Currencies
Bloomberg’s dollar gauge, which tracks the greenback against 10 major peers, slipped 0.5% in London and was set for a 1.9% weekly loss. Fed Funds futures show odds of the central bank boosting borrowing costs in June fell to 12% following Thursday’s GDP update, having held at around 21% when the Fed concluded its policy meeting on Wednesday.
The euro, Swiss franc and South African rand all advanced 0.5% versus the dollar.
The yen strengthened against all 16 major peers for the second day in a row, climbing as much as 1% to 107.08 a dollar, the highest level since October 2014. It surged 4.3% this week as the BOJ defied economists’ expectations that stimulus would be stepped up.
Governor Haruhiko Kuroda told reporters after the review that he wants to wait and see how the introduction of negative rates in January affects the economy.
"The BOJ seems to have descended into a haze of confusion,"said Richard Jerram, the chief economist at Bank of Singapore. "They mismanaged expectations running up to the meeting - and that is clear from the market reaction."
The yuan was little changed versus the greenback after China’s central bank boosted its daily reference rate by 0.6%, the most since a dollar peg ended in July 2005. The steep increase in the fixing reflects the dollar’s slide rather than any policy intentions, according to Ken Cheung, a currency strategist at Mizuho Bank in Hong Kong.
Stocks
The Stoxx Europe 600 Index slid 1 percent, snapping a three-day advance. Telefonica SA, Spain’s largest phone company, declined 0.8% after reporting first-quarter sales that trailed analysts’ estimates. Eni SpA lost 0.9% on worse-than-expected earnings, while BASF SE gained 1.1% after its profit beat projections.
Nikkei 225 Stock Average futures fell 0.5% in Singapore, while contracts on the Standard & Poor’s 500 Index were little changed. Exxon Mobil, the largest US energy company, and Chevron are due to release their results on Friday.
The MSCI Asia Pacific excluding Japan Index fell 0.5%, headed for a 1.7% weekly decline. Hong Kong’s Hang Seng Index declined 1.4%, led by slides in energy stocks. PetroChina slumped 3.6% after posting its first loss since it listed in 2000, while Cnooc dropped 2.8% following a decrease in first-quarter revenue.
“We advise clients to reduce their investments in equities and other risky assets in both developed and emerging markets,” said Komsorn Prakobphol, a senior investment strategist in Bangkok at Tisco Financial Group. “We expect the equities to begin some correction in the second quarter after a strong rally so far this year. Oil prices are at a level that will probably see some correction.”
Commodities
The Bloomberg Commodity Index, a measure of returns on 22 raw materials, rose 0.2%, extending this month’s gain to 7.8%. Oil is set for its best month in a year in New York, buoyed by data this week that showed US output is at the lowest level since October 2014.
Gold and silver both rallied for the fifth day in a row and were headed for their highest closes since January 2015. Copper advanced 0.8% in London on Friday, while nickel, zinc and lead gained more than 1%.
Soybean futures in Chicago are set for a12% increase this month, the most since October 2014, after heavy rains and flooding destroyed crops in South America. Iron-ore futures on the Dalian Commodity Exchange have surged 20% this month, the most since the contract started in 2013, and that’s prompted the authorities to clamp down on excessive speculation.
Bonds
The Bloomberg US Treasury Index declined 0.3% in April, set for the first monthly loss of 2016. The 10-year yield increased by one basis point to 1.83%, having started the month at 1.77%. Similar-maturity bonds in Japan yielded minus 0.085% at the end of their final trading session in April.
