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Published: Sun, March 19, 2017
Global Media | By Abel Hampton

Forex - Dollar holds onto modest gains, but remains near 5-week trough

Forex - Dollar holds onto modest gains, but remains near 5-week trough

Gold rallied for the second straight session on Thursday, climbing to its highest level in over a week after the US central bank signaled only gradual rate tightening and the dollar slid to its lowest in five weeks.

The Federal Reserve may be well set on its interest-rate raising course this year, but gains in the dollar could prove harder to come by.

In New York, the Dow Jones industrial average fell 13.30 points to 20,921.25. The Nasdaq composite was close to flat at 5,890. The world's largest gold-backed exchange-traded fund saw outflows after three straight session of inflows this week. "I would expect gold to trade in a wide band of $1,190 - $1,230 between the French elections and US Federal Reserve meeting in May", said Jiang Shu, chief analyst at Shandong Gold Group.

Yields on 10-year U.S. Treasuries nursed their heaviest falls since last August.

Two-year notes, which are considered most vulnerable to Fed policy, were down slightly in price, while yields increased to 1.324 percent from 1.316 percent.

The Fed raised short-term rates by a quarter of a percentage point on Wednesday, as many investors expected.

"At the moment, the dollar remains in correction mode, which we had fully expected", said Fawad Razaqzada, market analyst, Forex.com in London. Utility stocks in the S&P 500 index lost 1.1 percent, the biggest loss among the 11 sectors that make up the index. It sank $9.69, or 5.4 percent, to $170.42.

Yields ticked higher as bond prices fell. They have often moved in the same direction recently because higher rates would allow banks to charge more for loans and earn bigger profits.

The index was down nearly 1 percent overall for the week and 1.2 percent since the Fed hiked rates on Wednesday.

That helped Amsterdam's AEX stock index climb to its highest level in more than nine years, while both Germany's DAX and France's CAC 40 hit their highest levels since mid-2015 as fears eased that the euro zone was heading inexorably towards a break-up.

Euro rose against the dollar on Thursday as investors digested the recent US interest rate increase and indications there would be no pick-up in the pace of monetary tightening. Brent crude, used to price global oils, fell 6 cents to $51.75 a barrel. Shares of big US banks, which slipped on the less hawkish-than-expected stance on Wednesday, were up about 0.7 percent.

The pound dipped against the euro this week as the Brexit bill allowing the Government to trigger Article 50 passed through the Houses of Parliament with no amendments. Shares of big United States banks, which slipped on the less hawkish-than-expected stance on Wednesday, were up between 0.5 and 1.5 per cent in premarket trading.

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