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 The Fed, via its 'dot plot' system, which charts what rate moves
policymakers expect, effectively chopped those forecasts in half,
from four hikes to two for the year.
It was a signal that triggered a slump in the dollar and a surge in
risk appetite that rolled from Wall Street to Asia and then into
Europe, where London, Frankfurt and Paris opened 0.5 to 0.8 percent
higher and bond yields fell. [GVD/EUR]
Commodity markets cheered too. Brent oil jumped over $41 a barrel as
a number of large producers also nailed down a date for an output
freeze meeting. Industrial metals such s copper saw their biggest
rise in two weeks. [MET/L]
But it was the currency markets that really grabbed the attention as
the dollar sank to one-month and three-week lows against the euro
and yen, and emerging market and oil and commodity-linked currencies
surged. [FRX/]
"Risk is thoroughly on," said Societe Generale global head of
currency strategy Kit Juckes. "All the chit chat was that they (the
Fed) were going to be hawkish, and they weren't."
"The dollar is obviously the loser, but it's good for shares, it's
good for oil, and good for debt too, I would say."
Europe's solid start saw MSCI's 46-country All World share index
climb over 1 percent on the day to reach its highest since Jan 4.
the opening trading day for most major markets of the year.
For emerging markets, the news was even better, as a more than 2
percent surge took the volatile asset class's stocks to their
highest since mid-December as currencies and debt rallied too.
One outlier was South Africa, though, ahead of a meeting of its
central bank after another week in which the rand has been hammered
by political worries.
SURGING EMERGING
The Malaysian ringgit, Indonesian rupiah and South Korean won all
rose more than 1 percent against the dollar as a clutch of Asian
currencies hit multi-month peaks.
"In the past, when the dollar weakened after the Fed was dovish, the
dollar weakness lasted for maybe about three to four months," said
Tan Teck Leng, FX strategist for UBS chief investment office Wealth
Management in Singapore.
"But is this the end of the strong dollar? We don't think so," he
said, adding that the Fed could start sounding hawkish again around
June and July to pave the way for a rate rise, possibly in
September.
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MSCI's broadest index of Asia-Pacific shares outside Japan climbed
to a two-month high as Australian stocks added 1 percent, South
Korea's Kospi rose 0.9 percent and Shanghai was up 1 percent.
The jump in the yen meant Japan's Nikkei lost out though, as it
closed down 0.2 percent.
World growth concerns, particularly regarding China, have rattled
markets through much of this year, and this was seen to have
influenced the Fed's shift in position as it cited the "global
risks" facing the U.S. economy.
The dollar index slipped to a one-month low of 95.038 as European
trading settled, and the euro was eyeing $1.13 for the first time
since mid-January as the dollar also slid below 112 yen.
Commodity-linked currencies rose strongly as products such as oil
and iron ore soared after the Fed's decision.
The Australian dollar, which had already jumped 1.2 percent
overnight, caught a fresh lift from an upbeat local jobs report and
rose to an eight-month high of $0.7620.
The Canadian dollar was firm at just under C$1.30 to the U.S. dollar
after rallying nearly 2 percent to a four-month peak of C$1.3094
overnight.
U.S. crude oil rose to a three-month peak of $39.54 a barrel after
surging nearly 6 percent overnight. Brent was up 95 cents at
$41.27 a barrel. [O/R]
Three-month copper on the London Metal Exchange traded up 1.5
percent at $5,065 a tonne. A weaker greenback tends to favor
commodities traded in dollars by making them cheaper for non-U.S.
buyers.
(Reporting by Marc Jones; Editing by Kevin Liffey)
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