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Dovish Fed minutes prompt biggest gains of 2014 for US stocks

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US stocks posted their largest one-day gain this year as the latest meeting minutes from the Federal Reserve suggest it may adopt a more cautious stance on hiking interest rates.

The minutes from the Fed’s policy meeting in September revealed a preoccupation with lessening domestic inflation pressures and the stronger dollar rather than a path to higher rates.

Committee members discussed how a strong dollar could hurt international competitiveness and could also lessen inflation in the US, as imported goods become cheaper. 

As a result, the Dow Jones index rose 1.6 per cent to 1,6994, its largest gain since last December, while the S&P 500 jumped 1.7 per cent to 1,969, its strongest rise in nearly 12 months.

The moves reversed the hefty declines prompted by IMF global growth downgrades seen on Tuesday.

In the currency markets, the US dollar fell to a two-week low against the euro, while the price of gold rising to $1,215.

Benchmark treasury yields, already at their lowest level of the year, dropped further on the news: the yield on 10-year notes fell to 2.331 per cent, the lowest closing level since June 2013. 

Investors had expected talk of an upcoming interest rate hike to dominate the meeting. Most forecasters continue to expect the first hike to occur at the end of H1 2015.

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