Dollar Weakens as Gold Leads Metals Higher; European Stocks Fall

Frankfurt (Apr 8)  The dollar weakened against its major peers, falling the most versus currencies from New Zealand to South Africa as emerging-market stocks rose toward a four-month high. European shares fell amid concern tension over Ukraine will escalate, while gold led metals higher.

The kiwi climbed 0.8 percent to 86.68 per dollar at 7:03 a.m. in New York, and South Africa’s rand jumped 0.7 percent to its strongest level since Jan. 1. The MSCI Emerging Markets Index increased 0.6 percent. The Stoxx Europe 600 Index slid 0.9 percent, extending earlier losses. Standard & Poor’s 500 Index futures slipped 0.3 percent, signaling the gauge’s will extend its biggest three-day slide since January. Gold advanced 1.1 percent.

Price swings in currency markets have tumbled to a six-year low as central banks from the U.S. to Japan seek to boost growth with cheap cash and record-low interest rates, encouraging investors to seek higher-yielding assets. Ukraine sent additional police forces into eastern regions after pro-Russian protesters seized government buildings in Donetsk, Luhansk and Kharkiv. Alcoa Inc., the biggest U.S. producer of aluminum, reports first-quarter earnings today.

“There certainly has been more interest again in emerging markets, suggesting that many investors are again looking out for yield,” said Jane Foley, senior foreign-exchange strategist at Rabobank International in London. “That’s clearly a risk-on scenario that is dollar-negative.”

Dollar Slides

The Bloomberg Dollar Spot Index fell 0.4 percent to 1,010.99, the lowest level since Nov. 1. The yen advanced 0.5 percent to 102.57 per dollar and the euro gained 0.2 percent to $1.3768.

The JPMorgan Global FX Volatility Index was little changed at 6.99 percent, after closing at 6.98 percent yesterday, the lowest since July 2007.

More than eight shares declined for every one that advanced in the Stoxx 600 index, with trading volumes 14 percent higher than the 30-day average, according to data compiled by Bloomberg.

“Ukraine worries, coupled with stock valuations which are high, are taking their toll on European markets,” Stephane Ekolo, chief European strategist at Markit Securities in London, wrote in an e-mail. “We are seeing an aggravation in the situation in Ukraine with some eastern provinces trying to declare independence and turning towards Russia.”

Russia called on Ukraine to halt all military preparations in the east “immediately” or risk civil war. The U.S. has said there is evidence that some protesters may be paid provocateurs.