Markets Make Gains, Despite Strong Greenback

The US dollar continues to make gains.

The greenback had its sixth straight weekly rise against the struggling euro last week; that’s the longest rise since 2000.

The strength helped make markets cautious, but most managed to finish with solid gains.

Driving the currency’s strength on Friday was the move by the Fed to lift the discount rates it charges to banks who borrow from it (now back to overnight terms).

That was also the cause of speculation that the Fed might start increasing its more important Federal Funds rate, a move the central bank and some key members went out of their way to say wasn’t about to happen.

The euro touched a nine-month low versus the US dollar.

The greenback also had its best week in seven against the yen.

For the week the dollar gained 0.14% to $US1.3613 per euro, from $US1.3632 on February 12.

It reached $US1.3444 on Thursday, the highest level since May 18. The dollar advanced 1.7% to 91.62 yen, from 89.96 last week, the biggest gain since the start of this year.

Based on Reserve Bank figures, the Aussie dollar ended higher against the greenback by its close in Sydney on Friday.

It was quoted at 89.09, from 88.90 the Friday before.

US and other markets are battling to get a handle the dollar’s move.

It should be bad for commodity markets: there were small gains on Friday with oil adding to recent gains to be up 12% in the past couple of weeks, despite the strength of the greenback.

Gold also edged up last week as well.

American investors are still upbeat about the economy (the Fed move signifies that it is now more confident about the health of financial markets).

This has seen the losses in markets halved in the past two weeks.

For example the Standard & Poor’s 500 index was down 8% by February 8, but last Friday that had been cut to a drop of 3.6%.

Over last week, the S&P 500 rose 3.1%, Nasdaq gained 2.8% and the Dow climbed 3%.

On Friday the Dow rose 9.45 points to 10,402.35, the S&P 500 rose 2.42 points to 1,109.17 and Nasdaq edged up 2.16 points to 2,243.87.

In Europe the markets had their best week since last July, with the Dow Jones Stoxx 600 Index up nearly 4%.

Indexes rose in 16 of the 18 western European markets.

The UK’s FTSE 100 increased 4.2%, Germany’s DAX 4% and France’s CAC 40 advanced 4.7%.

In Asia, markets fell for the third week in four with the MSCI Asia Pacific Index down almost 1%.

Hong Kong’s Hang Seng Index fell 1.9%, Japan’s Nikkei fell 2.1%, leaving it up 0.3% for the week.

South Korea’s Kospi fell 1.7%, while markets in China, Taiwan and Vietnam were closed all week for the Lunar New Year.

Chinese share dealings resume today after the New Year break.

In Australia, the ASX200 index was down 19.8 points, or 0.4%, at 4635.1, while the All Ordinaries index was off 17.6 points, or 0.4%, to 4656.3.

Despite the loss for the day, the market was up about 2% for the week, its second rise in a row.

Oil prices finished in sight of $US80 a barrel after a two-week rally that saw gains of 12% by Friday.

March New York Nymex crude ended up 75 cents to end at $US79.81 a barrel.

The price of the March contract, which ends on Monday, has rallied by 12% since February 5.

Most of the trading already has moved to the April contract, which added 64 cents Friday to settle at $US80.06 a barrel, which is perhaps a better guide.

Oil supplies in the US remain high for this time of year with petroleum consumption slumping to 11-year lows, according to the latest government figures.

But reasonable reports on new home construction, industrial production and manufacturing (which all showed some signs of continuing growth), have boosted confidence that the recovery is on track and growing stronger.

In London, Brent crude fell 6 cents to $US77.72.