The dollar continued to power higher yesterday, pressuring stocks and commodities, on expectations of a Federal Reserve interest rate hike that stand in contrast to easing monetary policy actions by most other major central banks.
The dollar index was on track for a back-to-back weekly gain of more than two per cent, setting up its strongest two-week performance in almost five years.
Stocks fell on Wall Street, with the S&P 500 set to fall for a third straight week. The index is about three per cent below its record high set this month. Energy stocks were among the biggest losers, falling along with a steep decline in crude oil.
The Dow Jones industrial average fell 210.8 points, or 1.18 per cent, to 17,684.42, the S&P 500 lost 19.39 points, or 0.94 per cent, to 2,046.56, and the Nasdaq Composite dropped 40.60 points, or 0.83 per cent, to 4,852.70.
The MSCI All-Country World equity index was down 0.8 per cent, and emerging-markets stocks fell 1.2 per cent.
The FTSEurofirst 300 pan-European index closed up 0.3 per cent. Stocks in Europe continued to be supported by the massive bond-buying program at the European Central Bank.
Investors are now looking ahead to the Federal Reserve’s policy meeting on Tuesday and Wednesday, hoping that it will yield clues about the timing of a rate increase.
The divergence in monetary policy continued to push the euro lower against the greenback, hitting a 12-year low of $1.0481. It was last down 1.2 per cent at $1.0509.
The dollar rallied even after disappointing US inflation and consumer sentiment data, which normally would weaken the currency.
The Mexican peso weakened versus the dollar after a two-day respite, trading about one per cent away from its record low hit on Wednesday.
The dollar index added 0.6 per cent to 100.06.
US crude fell 3.8 per cent to $45.22 per barrel, while Brent crude fell 2.4 per cent to $55.73. The global oil glut is getting bigger and US production shows no sign of slowing, the International Energy Agency said.
The US benchmark 10-year Treasury note yield edged up to 2.1122 per cent from Thursday’s 2.096 per cent, reflecting a price decrease of 5/32.
“The market’s consolidating,” said Kim Rupert, managing director of global fixed income at Action Economics in San Francisco. “It’s hard to be a buyer at this point.”
Spot gold was little changed near $1,153 an ounce, following nine consecutive sessions of declines. Copper was little changed on the day and on track to finish the week with a 1.7 per cent gain.