BLBG: Dollar Gains as Metals, Treasuries Fall on Fed Signal
The dollar strengthened to a 2 1/2- year high against the yen, gold led commodities lower and Treasuries fell after the Federal Reserve said it may cut cash infusions this year. European stocks retreated while U.S. equity-index futures were little changed.
The U.S. currency rose against all but one of its major peers, appreciating 1.2 percent to 88.27 yen at 7:30 a.m. in New York. Treasuries fell for a fourth day, pushing 10-year yields to the highest since May, while U.K. gilts and German bunds also declined. Gold dropped 1.6 percent and oil in New York slid 1.1 percent. The Stoxx Europe 600 Index slipped 0.2 percent, while Standard & Poor’s 500 Index futures added less than 0.1 percent.
Fed board members said they will probably end their $85 billion monthly bond purchases, known as quantitative easing, in 2013, according to minutes of their Dec. 11-12 meeting released yesterday. U.S. employers probably added workers in December at about the same pace as in the prior month even as lawmakers struggled to reach a budget deal, economists said before a Labor Department report today.
“The main focus today is the surprise from the Fed minutes yesterday,” said Michael Sneyd, a currency strategist at BNP Paribas SA in London. The moves in markets today “show where expectations were regarding how much QE the Fed would be doing. We’re seeing some unwinding of expectations.”
The Dollar Index (DXY), which tracks the currency against those of six major U.S. trading partners, rose 0.6 percent. The U.S. currency climbed as much as 1.3 percent to 88.33 yen, the strongest level since July 2010. The euro dropped 0.3 percent to $1.3006.
Yen Slides
The yen weakened at least 0.4 percent against all major peers and is set for an eighth weekly drop versus the U.S. currency, the longest run of losses since 1989. Bank of Japan Deputy Governor Kiyohiko Nishimura is due to speak in San Diego today amid bets the central bank will boost money supply to weaken the yen and end deflation.
The yield on 10-year Treasuries rose five basis points to 1.96 percent, the highest since May 2. The rate on 10-year German bunds gained as much as five basis points to 1.53 percent, the highest since Oct. 29. U.K. 10-year gilts yield climbed above the rate on similar-maturity French bonds for the first time since April 11, 2011, increasing as much as six basis points to 2.13 percent.
The cost of insuring corporate debt in Europe rose, snapping a five-day decline to the lowest level in more than 15 months, according to data compiled by Bloomberg. The Markit iTraxx Europe Index of credit-default swaps on 125 investment- grade companies increased two basis point to 105 and the Markit iTraxx Crossover Index of swaps on 50 companies with mostly high-yield ratings increased 11 basis points to 429.
Commodities Slip
The S&P GSCI gauge of 24 commodities dropped 1.1 percent. Silver fell as much as 3.3 percent to $29.24 an ounce, the lowest since Aug. 22, and gold declined to $1,636.76 an ounce. West Texas Intermediate crude retreated to $91.88 a barrel.
Electricity for delivery next year in Germany rose to 45.25 euros a megawatt-hour, after touching a record intraday low of 45 euros yesterday amid weaker prices for coal and emission permits, according to broker data compiled by Bloomberg.
The Stoxx 600 (SXXP) retreated from the highest close in 22 months as three shares fell for every two that advanced. Fresnillo Plc (FRES), the world’s biggest primary silver producer, sank 5.6 percent in London trading as UBS AG downgraded the shares and the precious metal retreated.
Jobless Rate
The advance in S&P 500 futures indicated the U.S. equities gauge will rebound from yesterday’s 0.2 percent drop. Labor Department data at 8:30 a.m. in Washington may show payrolls rose by 153,000 last month after a gain of 146,000 in November, according to the median estimate of economists surveyed by Bloomberg. The jobless rate probably held at 7.7 percent, the lowest level since 2008.
The MSCI Emerging Markets Index (MXEF) fell 0.6 percent, declining for the first time in 10 days, snapping the longest rally in 14 months. The gauge has climbed 9.9 percent since the Fed announced a third round of stimulus on Sept. 13. Benchmark gauges in Brazil, Poland, Hong Kong, South Korea and Taiwan declined at least 0.4 percent, while the Shanghai Composite Index rose 0.4 percent in the first day of trading this year.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net
