The dollar was on the defensive Thursday after suffering its worst drubbing in five months while bonds celebrated a comeback on speculation the Federal Reserve might not tighten U.S. policy as aggressively as previously thought. Ciara Lee reports
A thanksgiving celebration... for U.S. bonds at least. Enjoying a comeback thanks to speculation the Federal Reserve might not tighten policy as aggressively as previously thought. It was a very different story for the dollar. It took its deepest one-day dive in five months after the release of minutes from the Fed's last meeting. (SOUNDBITE) (English) SENIOR MARKETS ANALYSTS, OANDA, CRAIG ERLAM, SAYING: " I think the negative reaction to the dollar comes from people or policymakers ongoing concerns about inflation, and whether we are going to see it pick up. There was a particular note as well on the markets themselves saying that they look not necessarily overvalued, but highly valued. Concerns about a possible market correction and how sizeable that would be." Fed Chair Janet Yellen had already fuelled worries about inflation reaching a 2 percent target earlier in the week. (SOUNDBITE) (English) FEDERAL RESERVE CHAIR JANET YELLEN, SAYING: "We expect it to move back up over a year or two. But I will say I am very uncertain about this, my colleagues and I are not certain that it is transitory, and we are monitoring inflation very closely. Japanese markets were closed on Thursday but there was no shortage of action in Asia. Chinese stocks faced their biggest slump in almost two years. The near 3 percent drop came as its recent bond market worries bled into equities. Europe's subdued mood continued - its main bourses opening in the red for the 10th day out of 13. The pan-European STOXX 600 slid 0.3 percent with Britain's FTSE 100 down 0.5 percent. Shares in one of Britain's heavyweight utilities Centrica plunged 22 percent - heading for what could be its biggest ever one day drop.