The dollar hit a more than six-year peak against the yen yesterday on data showing US jobless claims fell more than expected last week, while global equity markets rallied after the Federal Reserve renewed a pledge to keep interest rates low.
Leading British shares rose as investors bet Scotland would remain in the United Kingdom after yesterday’s referendum.
A Thomson Reuters basket of 12 stocks listed on Britain’s FTSE 350 index, headquartered in Scotland, has slowly risen over the last two weeks.
The dollar index, a gauge of the greenback’s value against six currencies, climbed to its strongest in more than four years, supported by the Fed’s interest rate forecasts that were higher than those projected in June.
But the index and the euro retreated after the British pound climbed 0.68 per cent higher to $1.6383 versus the dollar on anticipation Scotland would remain in the UK union.
“The dollar will be in a consolidation phase in the short term after yesterday’s sharp gains,” said Greg Moore, senior currency strategist at RBC Capital Markets in Toronto.
The dollar rose as high as 108.96, the strongest since August 2008, and last traded at 108.65, up 0.68 per cent.
The euro rebounded, rising 0.41 per cent to $1.2918.
Wall Street rallied, with both the benchmark S&P 500 and Dow indexes setting new intraday highs.
The Dow Jones industrial average rose 90.92 points, or 0.53 per cent, to 17,247.77. The S&P 500 gained 8.15 points, or 0.41 per cent, to 2,009.72 and the Nasdaq Composite added 27.35 points, or 0.6 per cent, to 4,589.54.
In Europe, the FTSEurofirst 300 index of top regional shares closed up 0.93 per cent to 1,398.03. MSCI’s all-country world index rose 0.28 per cent to 428.67.
US Treasury debt prices turned down, with investors driving some shorter-maturity yields to highs not seen since May 2011 after the Fed on Wednesday raised its forecasts for some interest rates.
Yields on two-year notes touched a high of 0.597 per cent before settling back to 0.5767 per cent on a 1/32 price decline. That level was last seen in May 2011.
Yields on benchmark 10-year Treasury notes were up to 2.6198 per cent on a price decline of 5/32.
The number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting a sharp slowdown in job growth last month was probably an anomaly.
While other US data yesterday showed some weakness in home building and factory activity, the underlying trend remained supportive of solid economic growth.
Oil traded lower amid ample supply and concern over weakening demand growth in major consumer nations, as well as by the dollar’s rise.
A stronger dollar makes dollar-priced commodities such as oil more expensive for buyers using other currencies but tends to weigh on oil prices.
Brent was down $1.41 at $97.56 a barrel, while US crude was down $1.27 at $93.15 a day after dropping on government data that showed US crude inventories rose 3.7 million barrels last week. (Reuters)