The dollar rose to its highest level in two weeks yesterday and world shares rebounded amid a broader recovery in global risk sentiment.
The US currency earlier slipped against the safe-haven Japanese yen after US President Donald Trump said on Wednesday he would recognise Jerusalem as the capital of Israel – a move that imperiled Middle East peace efforts and provoked widespread condemnation.
But as global stocks rose yesterday, the dollar gained almost half a percent against the yen to trade at 112.72 yen and hit a two-week high against a basket of peers.
The MSCI World Index, which tracks shares in 47 countries, was up 0.1 per cent. Futures markets indicated a positive open for Wall Street.
Underpinning some of the dollar’s gains, analysts said, was cautious optimism on US tax legislation.
On Wednesday, Senate Republicans agreed to talks with the House of Representatives on their two tax bills. Early signs are they can agree on a final bill before a self-imposed December 22 deadline.
“The corporate tax reform has the potential to have a significantly positive effect on the greenback, but due to other parts of the reform – those that are aimed at preventing tax base erosion,” wrote Commerzbank currency strategists in a note to clients.
“It is still unclear how this part of the reform will be designed... so we might end up with something that was not included in either of the proposals. It is therefore far from certain how much of a dollar-positive effect the tax reform will result in.”
Upbeat US private-sector employment data released this week also provided some support to the dollar.
Nikkei recoups much of its loss the previous day
But strategists said the currency would trade in narrow ranges until the release of the closely watched non-farm payrolls report today.
Bitcoin soared to a record high of $14,870 on the Bitstamp exchange, continuing a staggering surge from less than $1,000 at the beginning of the year.
European stock markets appeared to take their cues from a recovery in tech stocks overnight in Asia and Wall Street, but they had turned negative by midday in London as the healthcare sector weighed. The pan-European STOXX 600 was last down 0.1 per cent.
Meanwhile, oil rose in a sign that investors are wary of pushing the market lower after an unexpectedly large rise in US stocks of refined products that has increased concern about the demand outlook.
US West Texas Intermediate crude futures traded at $56.15 per barrel in European trade, up 0.4 per cent on the day. Brent futures gained nearly 0.7 percent to $61.62 per barrel.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.2 per cent as some technology bellwethers rebounded, with Tencent rising over three per cent and Alibaba more than two per cent.
In Japan, the Nikkei jumped 1.5 per cent, recouping much of its 2.0 per cent loss the previous day, which was its biggest fall since late March.
Copper rose as bargain hunters took advantage of recent losses, but analysts expect further downward pressure due to weaker demand from China.
Copper traded at $6,572 a tonne, up 0.2 per cent on the day and above a two-month low of $6,507.5 touched on Tuesday.