The dollar hit a 14-year high yesterday as the yen slid after the Bank of Japan stuck to its ultra-loose monetary policy, while US stock indexes touched record highs as the rally in riskier assets since the US election looked set to continue.
On Wall Street, the Dow neared the 20,000 level as reassurance over Italy’s plan to spend up to €20 billion to rescue its troubled banks offset risk aversion following attacks in Turkey and Germany a day earlier.
US stocks have rallied since the November 8 election, with the S&P 500 rising nearly 6 per cent on bets that President-elect Donald Trump’s plans for deregulation and infrastructure spending will give a boost to business.
The Dow Jones industrial average rose 85.04 points, or 0.43 per cent, to 19,968.1, the S&P 500 gained 6.81 points, or 0.30 per cent, to 2,269.34 and the Nasdaq Composite added 19.93 points, or 0.37 per cent, to 5,477.38.
Both the Dow and Nasdaq hit all-time intraday highs.
European shares steadied, with the pan-European FTSE Euro 300 adding 0.3 per cent. Emerging market shares were flat while MSCI’s broadest index of Asia-Pacific shares outside Japan ended down 0.3 per cent.
China’s CSI 300 index slid 0.6 per cent on Beijing’s move to tighten supervision of shadow banking activities and on liquidity concerns, while Japan’s Nikkei closed up 0.5 per cent after a late BOJ-linked rally.
The dollar rose, tracking US bond yields higher , as the strong appetite for risk assets pushed traders out of bonds and into stocks. Positive comments on Monday from Federal Reserve Chair Janet Yellen on the state of the US labour market also boosted the greenback.
The dollar rose almost half a per cent against a basket of major currencies to 103.65, the highest level since December 2002.
Its gains were strongest against the yen, which slid around one per cent after the Bank of Japan, shrugging off the yen’s recent slump, said it would keep monetary policy loose.
Benchmark 10-year US government bond yields, which set the bar for global borrowing costs, rose to just above 2.58 per cent.
The dollar rally and bond market selloff since the November 8 US election have been stoked by bets Mr Trump’s administration would enact looser fiscal policy, which would spur higher US growth and inflation.
The greenback has risen 12 per cent versus the yen since Mr Trump’s surprise victory. The win was made official on Monday after Mr Trump surpassed the required 270 Electoral College votes.
Oil prices hit one-week highs on anticipation of a decline in US crude stocks.
Brent crude gained around 1.5 per cent to $55.72 a barrel while WTI added 0.63 per cent to $52.45 a barrel.