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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 in a nod to the "global risks" casting a
cloud over the world's largest economy.
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, although shares there, especially exporters winced as the
euro jumped.
London was off a modest 0.2 percent bolstered by a near 5 percent
jump in mining firms, but Frankfurt and Paris were down 1.8 and 1.6
percent and Wall Street was expected to open down too having hit a
2016 high on Wednesday.
Commodity markets continued to cheer however. Brent oil jumped above
$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.
But it was the currency markets that really grabbed the attention as
the dollar sank to 1-1/2 year and one-month lows against yen
and the euro respectively, and emerging market and oil and
commodity-linked currencies surged.
"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."
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 showed was showing no sign of stabilizing as U.S. trading
began, having sliced all the way down to 110.77 yen and catapulted
the euro above $1.13 for the first time since mid-January.
Currency traders were suddenly betting the greenback rather than the
euro will be heading south and commodity-linked currencies rose
strongly as products such as oil and iron ore also soared on Fed
hopes.
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.
SURGING EMERGING
Despite Europe's reversal, MSCI's 46-country All World share index
climbed over 0.8 percent on the day to reach its highest since Jan
4., the opening trading day of 2016 for most major markets.
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 and currencies and debt rallied too.
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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.
In the latest twist, South Africa's deputy finance minister received
a death threat shortly before he publicly accused a wealthy family
with links to President Jacob Zuma of offering him the job of
finance minister, a newspaper said on Thursday.
Zuma has previously said his ties with the family are above-board.
His office was not immediately available to comment, although he is
due to answer questions in parliament on Thursday.
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.
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.
Oil prices, the other main driver of global market sentiment in
recent months, 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.
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 Jon Boyle)
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