US Dollar hits new 11-week high as oil prices slump
Malta (Oct 12) The dollar hit an 11-week high yesterday on growing expectations US interest rates will rise in December, while crude prices retreated on concerns a proposed cut by the world’s largest oil exporters might not be enough to reduce a global supply glut.
Stocks on Wall Street opened lower and European shares retreated, as crude oil fell and pulled the UK benchmark FTSE 100 equity index down after it set a record intraday high that was helped by more further sterling weakness.
The British pound has lost more than four per cent of its value against the dollar over the past week as investors fret about the impact of a “hard exit” by Britain from the European Union.
In the United States, investors are looking to today’s release of the minutes from the Fed’s policy-setting meeting in September for signs of a December rate hike.
The futures market has attached a roughly 70 per cent probability that the Fed will lift rates in December, which pushed the benchmark 10-year US Treasury yield to a more than four-month high.
“Recent data on jobs, manufacturing and services growth have shown compelling strength that could green light a US rate hike by the end of the year,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
The dollar index, which measures the greenback against six major currencies, jumped 0.64 per cent to 97.545, after hitting 97.595 – its highest since late July.
The euro fell to more than a two-month low against the dollar, and was last down 0.68 per cent at $1.1061. Against the yen, the dollar was basically flat at 103.54, but has gained more than two per cent so far this month.
Crude oil prices slipped, retreating from one-year highs after mixed responses by Russian oil industry officials toward a call from the Organisation of the Petroleum Exporting Countries for all major crude producers to cut output.
The International Energy Agency, the energy watchdog of the West, said it was unclear how rapidly global oil supply could fall in line with demand even if Russia and Opec agreed on a steep enough cut.
Brent crude oil was down 40 cents at $52.74 a barrel and US West Texas Intermediate crude slipped 38 cents to $50.98.
The Dow Jones industrial average fell 153.37 points, or 0.84 per cent, to 18,175.67. The S&P 500 slid 20.83 points, or 0.96 per cent, to 2,142.83 and the Nasdaq Composite lost 56.43 points, or 1.06 per cent, to 5,272.24.
In Europe, the pan-regional FTSEurofirst 300 index fell 0.45 per cent to 1,344.16. MSCI’s all-country stock index fell 0.94 per cent.
US Treasury yields rose with benchmark 10-year notes hitting their highest since June 3 as risk appetite returned to markets.
The 10-year US Treasury note fell 6/32 in price to yield 1.7568 per cent.