GLOBAL MARKETS-Dollar falls on Fed talk, stocks rebound

* Dollar falls broadly after talk of large Fed stimulus

* Markets recover after surprise China rate hike

* Stocks rise as earnings becomes focus
(Updates with U.S. markets’ open, changes byline, dateline;
previous LONDON)

By Manuela Badawy

NEW YORK, Oct 20 (BestGrowthStock) – The U.S. dollar weakened
broadly on Wednesday as investors expected the Federal Reserve
will soon offer additional stimulus to the economy, while
stocks and commodities recovered after China’s surprise
interest rate hike.

The dollar fell across the board after talk the U.S.
central bank plans to spend $500 billion in bond purchases over
the next six months, with an open-ended commitment to do more
in the next 18 months. Medley Global Advisors, a consulting
firm, described the Fed’s plans in a report, a source told
Reuters. For details, see [ID:nLDE69J20L].

The prospect of an increase in dollar supply weakened the
currency’s value while it fueled a rally in equity markets.
Such a development also will likely anger emerging economies
contending with a flood of capital as investors chase higher
yields.

The forex market (Read more about the difference between the forex market and the stock market. ) is “in a bit of a gray area” that should
persist at least through a weekend gathering of the G20 and
the Fed’s November meeting, Camilla Sutton, Scotia Capital
currency strategist said. Fed officials are expected to
announce plans to pump more money into the economy after their
meeting.

“We think the dollar will end the year weaker, but for now,
we’re probably going to be in a period of more subdued trading
until we get a firmer idea of where policymakers are headed,”
she said.

U.S. stocks (Read more about the stock market today. ) rose as investors switched focus to positive
corporate earnings from the impact of an interest rate increase
by China on the world economy.

China triggered a global risk sell-off on Tuesday when it
announced a hike in interest rates, the first in nearly three
years.

The move stoked fears among investors about further
tightening in one of the global economy’s main drivers and
coincided with an increase in tensions over global currency
policies before a meeting of Group of 20 finance ministers this
weekend.

The Dow Jones industrial average (.DJI: ) was up 125.49
points, or 1.14 percent, at 11,104.11. The Standard & Poor’s
500 Index (.SPX: ) was up 12.33 points, or 1.06 percent, at
1,178.23. The Nasdaq Composite Index (.IXIC: ) was up 27.23
points, or 1.12 percent, at 2,464.18.

The MSCI all-country world index (.MIWD00000PUS: ) was up
0.94 percent while Europe’s FTSEurofirst 300 (.FTEU3: ) was up
0.25 percent, helped by the latest Bank of England Monetary
Policy Committee minutes, which boosted expectations of further
UK quantitative easing.

Japan’s Nikkei (.N225: ) closed down 1.65 percent, with
exporters shaken by fears of slowing Chinese growth.

DOLLAR SLIPS

Investors resumed selling the dollar against most
currencies on Wednesday, rediscovering an appetite for
higher-yielding assets.

The dollar was down against major currencies, with the U.S.
Dollar Index (.DXY: ) off 1.15 percent at 77.288.

The euro (EUR=: ) was up 0.92 percent at $1.3939 with traders
attributing some of the move to comments from German Chancellor
Angela Merkel, who said it may be time to think about exit
strategies. It hit an 8 1/2-month high above $1.41 last week.

Merkel’s remarks on exit strategies from loose monetary
and fiscal policy echo similar comments from European Central
Bank Governing Council member Axel Weber and contrast with
expectations for more monetary easing from the Fed.

Against the Japanese yen, the dollar (JPY=: ) was down 0.50
percent at 81.15 from a previous session close of 81.560.

U.S. government bond prices were flat to slightly higher in
light trading.

The benchmark 10-year U.S. Treasury note (US10YT=RR: ) was
unchanged, with the yield at 2.479 percent. The 2-year U.S.
Treasury note (US2YT=RR: ) was flat, with the yield at 0.36
percent. The 30-year U.S. Treasury bond (US30YT=RR: ) was up
6/32, with the yield at 3.903 percent.

In energy and commodities, crude oil (CLc1: ) rose $1.87, or
2.35 percent, to $81.36 per barrel, and gold prices (XAU=: ) rose
$9.55, or 0.72 percent, to $1,344.
(Additional reporting by Steven C. Johnson, Daniel Bases,
Rodrigo Campos in New York; Editing by Kenneth Barry)

GLOBAL MARKETS-Dollar falls on Fed talk, stocks rebound