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 Singapore set the tone for the IMF's spring meeting as its
normally conservative central bank unexpectedly eased policy, while
Europe was watching a meeting of the Bank of England as sterling
<GBP=D4> continued to suffer worries over June's vote on EU
membership.
Oil prices fell again as OPEC warned of slowing demand and as Russia
hinted that there might only be a loose agreement on output levels
at a exporter meeting in Doha at the weekend.
The fall came as the dollar, which most commodities are priced in,
flexed its muscles again having just chalked up its biggest one-day
gain in over a month.
It was at $1.1246 per euro <EUR=>, way above a six-month low of
$1.1465 touched on Tuesday and up 0.1 percent on the yen to 109.42
yen <JPY=>, well away from Monday's 17-month trough of 107.63 yen.
"The dollar has been doing well over recent days particularly
against Asian currencies today after the MAS (Singapore central
bank) eased policy," said Societe Generale FX strategist Alvin Tan.
 "We have the IMF meetings coming and we also have the Doha meeting
which actually for the markets could be more important considering
how bulled up the oil market has been recently."
European shares <.FTEU3> had a subdued first couple of hours as
traders cashed in after a 2.6 percent jump on Wednesday and as
miners <.SXPP> fell on lower oil prices. <LCOc1>
Big gains in Asia overnight, however, meant MSCI's 46-country All
World stocks index was up a fifth straight day to its highest since
mid-December. Asian shares have surged 5 percent since Friday.
SINGAPORE STING
The main action came in Singapore as its central bank set the rate
of appreciation of the Singapore dollar policy band at zero after
data previously showed economic growth stalled in the first quarter.
It sparked the biggest drop for the Singapore dollar <SGD=D3 in
eight months and triggered a downdraft in other Asian currencies.
The Korean won <KRW=KFTC> fell just as much as the SGD as it sank 1
percent against the greenback.
"It's very interesting, and eye-catching, that the MAS has gone back
to post-global financial crisis settings, and sends a strong message
about the weak external environment," said Sean Callow, senior
currency strategist at Westpac in Sydney.
"As one of the world's most trade-sensitive economies, Singapore's
concern over a 'less favourable external environment' should be
noted by the likes" of South Korea, Australia and New Zealand,
Callow added.
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Notwithstanding the optimistic trade data out of China on Wednesday,
Singapore's policy decision is yet another reminder of the headwinds
facing the global economy.
Earlier this week, the IMF cut its global growth forecast for the
fourth time in the past year, citing a bunch of factors including
chronic weakness in advanced economies.
Risk appetite remained robust with an index of high yield debt <HYG>
settling at its highest levels since early December.
In the government bond markets, yields swung lower with the yield on
the 30-year Japanese government bond <JP30YT=RR> briefly falling a
record low of 0.385 percent. U.S. debt followed with yields on
ten-year notes slipping to 1.75 percent.
The yield curve, measuring the gap between the 10-year notes and the
two-year bills and an indicator of interest rate expectations,
flattened to 100 basis points, signalling a benign rate view.
Benchmark German Bund yields tick down again in Europe too as the
euro <EUR=> extend its weakness after falling 1 percent on
Wednesday, its biggest fall in 5 months.
Oil markets saw more choppy trading. Prices fell after Reuters
reported that Russian oil minister Alexander Novak told a
closed-door briefing that a deal on an oil output freeze scheduled
to be signed this month in Doha will be loosely framed with few
detailed commitments.
Brent crude futures <LCOc1> fell 1.5 percent in Asian and European
trade to $43.53 per barrel after having scaled a high of $44.94 on
Wednesday. U.S crude was down to $41.26 while safe-haven gold <XAU=>
and industrial metal copper <CMCU3> also fell.
(Editing by Keith Weir)
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