Dollar Trims Weekly Advance as U.S. Stocks Rally to Record High

  • India’s rupee recovers from record lows; yen trims week’s drop
  • Oil tumbles most in two months amid OPEC accord skepticism

What's Driving the U.S. Dollar Rally?

The dollar trimmed a weekly advance that was spurred by prospects of higher U.S. interest rates. U.S. stocks rallied to a record.

The Bloomberg Dollar Spot Index fell from the highest level in more than a decade, while emerging-market currencies clawed back gains after India’s rupee fell to a record-low on Thursday. All four major U.S. equity benchmarks reached all-time highs as trading resumed following the Thanksgiving holiday. Oil dropped the most in more than two months on doubts OPEC will come to an accord to cut output as planned talks between producers inside and outside the group was canceled.

Strong economic data and the prospect of increased spending after Donald Trump won the Nov. 8 U.S. presidential vote have fueled a surge in bets on Federal Reserve rate hikes, propelling the greenback higher against all but two of it peers this month. Traders see an increase in borrowing costs in December as a certainty, while the odds of additional moves by June have risen to more than 60 percent, according to futures data tracked by Bloomberg.

“The dollar bull run had perhaps become a little stretched," said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We’ve had a very strong run since the election and it’s just a bit of a pull back."

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2 percent at 4 p.m. in New York.
  • The yen posted the worst weekly performance among major currencies.
  • The rupee strengthened after sinking to a record low Thursday.
  • China’s yuan, which fell to an eight-year low this week, was little changed.
  • South Africa’s rand pared gains after the nation moved closer to a junk credit rating as Fitch Ratings Ltd. changed the outlook on its assessment to negative from stable.

Stocks

  • The S&P 500 Index rose 0.4 percent to a record high. Equity markets in the U.S. are due to shut at 1 p.m. local time Friday.
  • European stocks also gained, with trading volume below the 30-day average.
  • Actelion Ltd. jumped after people familiar with the matter said Johnson & Johnson has approached the Swiss drugmaker about a potential takeover.
  • Emerging-market shares posted their weekly advance in more than a month.

Bonds

  • The difference between German two-year yields and the equivalent swap rate reached the widest level since 2012 amid speculation the European Central Bank may relax its deposit rate floor for bond purchases.
  • Yields on 40-year Japanese bonds reversed an earlier climb as an auction saw 499.7 billion yen ($4.4 billion) of securities sold at a highest yield of 0.725 percent.
  • “The 40 year bonds were well received in the auction, triggering a bout of bond buying,” said Masahiko Sato, an analyst at Nomura Holdings Inc. in Tokyo.

Commodities

  • Gold’s first gain in four days cut this week’s loss to 2 percent.
  • West Texas Intermediate crude oil lost 4.3 percent to $46.06 a barrel.
  • Ore with 62 percent content delivered to Qingdao climbed 3.5 percent to $79.61 a dry ton on Friday, according to Metal Bulletin Ltd.

Watch Next: The Headwinds Facing Currency and Commodity Markets

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— With assistance by Adam Haigh, Netty Idayu Ismail, Lynn Thomasson, and Charlotte Ryan

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