The US dollar yesterday climbed to its highest level since 2003 on continued bets on faster inflation and higher interest rates, while Treasuries resumed a selloff that left benchmark yields on track to post their steepest two-week increase in 13 years.
A growing perception that the economic policies of US President-elect Donald Trump will lift consumer prices pushed the dollar higher, weighing on crude and other commodities.
On Wall Street, the tech- and biotech-heavy Nasdaq Composite hit a record intraday high before slipping lower.
The Dow industrials and S&P 500 were also near record highs despite the day’s decline.
“I think given the major indexes are at or near all-time highs, we’re probably due for a little bit of a digestion period,” said Terry Sandven, chief equity strategist at US Bank Wealth Management.
“Equities are generally expected to move sideways
until we get a little more of
visibility into what some of the policies are going to be with the new administration.”
The Dow Jones industrial average fell 39.48 points, or 0.21 per cent, to 18,864.34, the S&P 500 lost 5.55 points, or 0.25 per cent, to 2,181.57 while the Nasdaq Composite dropped 14.15 points, or 0.27 per cent, to 5,320.83.
The pan-European FTSEurofirst 300 index fell 0.54 per cent, while MSCI’s gauge of stocks across the globe fell 0.49 per cent.
Emerging market stocks fell
0.2 per cent and remained near a four-month low hit Monday.
The US dollar’s rise against the yen raised hopes of an earnings boost to Japanese exporters,
helping lift the Nikkei average to a 10-month high.
The blue-chip Japanese stock index closed 0.6 per cent higher.
Last week’s unexpected US election victory from political neophyte Donald Trump has led to a repricing of assets, most notably in currency and bond markets.
Federal Reserve policymaker James Bullard said yesterday
he is leaning towards supporting a rate rise in December, adding that a plethora of potential changes under Mr Trump could affect future policy.
The euro fell 0.3 per cent to $1.0594, while the yen weakened to 110.51, having earlier fallen to 110.92 per dollar. Against the
Chinese yuan, the greenback hit 6.895, its highest since mid 2008.
The dollar index hit a high of 101.48, its highest level since April 2003. It has risen over 4 per cent in the last two weeks, its biggest
fortnightly rise since March 2015.
The 10-year US Treasury yield rose to 2.355 per cent, its highest since December. It is up about 51 basis points over the last two weeks - the biggest such rise in 13 years. Benchmark 10-year notes last fell 14/32 in price.
US crude last fell -0.2 per cent to $45.50 a barrel and Brent traded at $46.60, down -0.2 per cent on the day.
Spot gold fell 0.6 per cent to $1,208.92 an ounce. US gold futures fell 0.7 per cent to $1,208.60 an ounce.
Copper fell 0.9 per cent to $5,444.00 a tonne.