The dollar recovered yesterday, having hit its lowest in more than two weeks as US central bankers showed they were taking a more guarded view of inflation, helped by a steep fall in the British pound.

Asian stocks climbed to their highest in a decade, powering global shares to another record high. The dollar’s dip came after minutes of the Federal Reserve’s September meeting on Wednesday showed policymakers had a prolonged debate about whether inflation would pick up and the path of future interest rate rises if it did not.

But it slowly regained ground yesterday and the pound tumbled after the European Union’s chief negotiator said talks over Britain’s exit from the European Union were at an impasse.

European government bond yields fell in step with their US peers. Italian yields led the trend, falling to near a three-week low after the government won support for electoral change likely to penalise the anti-establishment 5-Star Movement.

US and German 10-year yields fell one basis points to 2.33 per cent and 0.45 per cent, respectively. Italian yields were down three basis points at 2.14 per cent.

The eye-catching move in stock markets came in Asia, with MSCI’s broadest index of Asia-Pacific shares outside Japan reaching their highest since December 2007, up 0.7 per cent on the day.

Japan’s Nikkei was up 0.4 per cent after brushing 20,994.40, its highest since November 1996. South Korea’s KOSPI added 0.55 per cent to reach a record high. Hong Kong’s Hang Seng scaled a decade-high.

MSCI’s broadest index of world stocks also reached record highs, as it has for six of the past eight trading days. It is on course for its 12th month of gains in October, its best run ever.

European stocks were less bouyant, with financial shares the biggest burden. Just Eat was the top performer after its merger with Hungryhouse got provisional clearance.

In currencies, sterling was down 0.7 per cent to $1.3135 after Michel Barnier said talks between the EU and Britain have not made major progress this week and are stuck over how much Britain should pay when it leaves.

The euro rose to its highest since September 25 in early trades and was on course for a fifth day of gains.

Political developments in Italy and easing tensions in Spain after Catalonia stopped short of declaring independence have supported the common currency in recent days.

In commodities, oil prices fell as US fuel inventories rose despite efforts by Opec to cut production.

Brent crude oil was down 60 cents at $56.34 a barrel. US light crude was 75 cents lower at $50.55. Both benchmarks have risen more than 20 per cent from their lows in June as world oil markets tightened.

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