Speculations of QE3 Boost Risk Appetite, as Equity Markets Rise, and US Dollar Drops

By FXEmpire.com

Speculations of further stimulus from the Federal Reserve Bank increased risk appetite around global financial markets, where traders are hopeful that the Fed will announce a third round of quantitative easing to support economic growth in the United States, which boosted demand for higher yielding currencies and pushed the U.S. dollar lower against major currencies.

Stocks in the United States rose by opening on Monday, where the Dow Jones Industrial Average was up by nearly 1.50% to trade around 10,979, while the S&P 500 index was up by nearly 1.35% to trade around 1139. European stock indexes were also higher before closing on Monday, where FTSE 100 was up by nearly 2% to trade at 5142 and the DAX was up by nearly 1.40% to trade around 5558.

The U.S. dollar fell against a basket of major currencies on Monday, where the U.S. dollar index was trading at 73.89, compared with the opening level at 74.09. The Euro rose against the Dollar, where the EUR/USD pair gained to trade at $1.4408, compared with the opening level at $1.4366, and the British Pound rose against the Dollar, where the GBP/USD pair traded around $1.6495, compared with the opening level at $1.6475.

Gold prices extended the gains earlier on Monday to set a new record high above $1890 an ounce, but eased slightly to trade around $1876 an ounce, and crude oil prices rose to trade around $83 a barrel.