US gasoline futures jumped to two-year highs while an already weak dollar hit 16-month lows against a basket of currencies yesterday as Tropical Storm Harvey pummelled the heart of the US energy sector and raised concerns about the economy.
The dollar index, on the defensive since US Federal Reserve chair Janet Yellen failed to mention monetary policy in a closely watched speech at Jackson Hole on Friday, extended its falls as the most powerful storm to hit Texas in more than 50 years was seen as negative for economic growth.
Weakness in the US currency helped the euro to its highest in two and a half years at close to $1.20, building on gains made on Friday after European Central Bank chief Mario Draghi refrained from talking down the strong currency.
Renewed euro strength pushed European stock markets to a two-week low, with German and French stock markets down around 0.3 per cent each.
Trade in general was subdued, with the London market closed for a public holiday.
“The strong euro is weighing on European stock markets,” said London Capital Group analyst Ipek Ozkardeskaya.
“Tapering talks could further demoralise stock traders in the run-up to the ECB verdict (next month). IT stocks are again on the chopping block.”
United States stock futures were largely flat.
Gasoline futures soared as much as 6.8 per cent as the storm, which came ashore on Friday, continued to batter the state.
They were last up five per cent.
US crude futures fell as the refinery shutdowns could reduce demand for American crude.
Brent futures also eased, but losses were capped as pipeline blockades in Libya slashed the Opec country’s production by nearly 400,000 barrels per day.
Asian stock markets including Japan’s Nikkei index ended the session little changed, though shares in Japanese property and casualty insurers skidded as investors fretted about the broader impact of the US storm.
In contrast, China’s major stock indexes rose to 20-month highs after a series of strong earnings .
While the euro extended Friday’s gains against the dollar, the US currency also slipped against the yen, dipping 0.1 per cent to 109.23 yen.
The dollar index – which tracks the US currency against six major rivals – fell to as low as 92.372, its weakest since early May 2016, before recovering a little to trade 0.3 per cent down at about 92.489.
Those declines came after Fed chief Ms Yellen focused more on financial stability in her Jackson Hole speech.
The remarks disappointed some investors who had hoped for hints on the Fed’s plans for interest rates, though most analysts had not expected Ms Yellen or Mr Draghi to shed new light on policies.