The dollar surged yesterday after weak eurozone inflation data for September raised expectations of new stimulus from the European Central Bank, while world stock markets were set for their largest quarterly drop in more than two years.

The dollar hit a four-year high against a basket of major currencies, putting the greenback on track for its biggest quarterly gain in six years, and a two-year high against the euro after consumer prices in the eurozone rose 0.3 per cent year-on-year, slowing from 0.4 per cent annual increases in August and July.

The inflation estimate boosted expectations for ECB President Mario Draghi to make clear when the ECB meets tomorrow that he is ready to take more stimul-ative action.

“From all appearances, Mario Draghi is being dragged, pushed and pulled into a more aggressive approach to stimulating demand,” said Peter Kenny, chief market strategist at Clearpool Group in New York.

The dollar index of major currencies rose 0.4 per cent to 85.954. The index has gained almost eight per cent over the last three months, the biggest quarterly gain since 2008 and a record-breaking 11 successive weeks of gains.

“It’s attractive, relatively speaking from an economic growth story standpoint relative to the rest of the world and it also represents a relatively secure play on risk aversion,” said Kenney.

Commodities came under pressure with the dollar strength as gold touched a nine-month low before paring losses, with the metal set to post its sharpest monthly loss since June 2013 and the first quarterly loss this year on expectations of further gains in the US currency.

Spot gold was off 0.7 per cent at $1,206.65 an ounce, trimming losses after data pointing to unsteady US growth.

Brent oil slumped below $95 a barrel, hit by dollar strength and ample supply, and was heading for its deepest quarterly drop in more than two years.

Brent for November delivery was down $2.69 at $94.51 a barrel, after hitting a more than two-year low of $94.24, putting it on track for its worst percentage drop since June 2013. It has lost nearly 14 per cent in the third quarter, its biggest quarterly drop since April-June 2012.

US crude was down $3.30 at $91.27 a barrel and was also on track for its biggest quarterly fall since the second quarter of 2012.

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