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Edinburgh - The dollar’s slide is gathering pace and that’s proving as much a boon for emerging markets and commodities as it is a drag for European equities.
The Bloomberg Dollar Spot Index sank to its weakest since June before reports on housing starts, inflation and industrial output that may add to signs growth in the world’s largest economy is losing momentum.
Emerging-market currencies reached the strongest in more than a year and stocks from those nations gained for a ninth day.
The pound jumped as UK inflation accelerated in July more than economists predicted, and the yen strengthened through 100 per dollar. Precious metals advanced with Treasuries.
The dollar is losing ground as lacklustre data in the world’s biggest economies fuel speculation the Fed will be slow to raise interest rates.
The Citigroup US Economic Surprise Index, which measures whether data beat or miss analyst forecasts, is at the lowest in more than a month.
And now, policy makers are also casting doubts on the path of monetary policy, with San Francisco Fed President John Williams saying that the central bank’s policy of targeting low inflation will no longer make sense.
"The unevenness seen over the last couple of weeks in US data has diminished the relative appeal of pursuing dollar strength," said Ned Rumpeltin, the European head of foreign-exchange strategy at Toronto Dominion Bank in London.
Minutes of the last Fed meeting due this week "will be an important platform to signal whether they hope to keep the potential for a 2016 rate hike on their agenda, although markets think that chance is fairly remote right now."
US data on Tuesday are forecast to show consumer prices were unchanged in July from the previous month and industrial output gains slowed.
Currencies
Bloomberg’s dollar index sank 1% as of 7:56 a.m. New York time while the yen appreciated 1.4% to 99.90 versus the greenback, the first time it has strengthened to less than 100 since June 24.
The MSCI Emerging Markets Currency Index added 0.4% and has risen 2% this month. South Korea’s won advanced 1%, its first increase in three trading sessions. South Africa’s rand strengthened 0.6% and Malaysia’s ringgit advanced 0.5%.
The pound rose 0.7% to $1.2973, after a Monday close of $1.2880 that was the weakest since June 1985. Tuesday’s gain cut its loss this month to less than 2%.
Consumer-price growth picked up to 0.6% from 0.5% in June, the office of National Statistics said in London on Tuesday.
Economists had forecast that the rate would stay at 0.5%, according to the median estimate in a Bloomberg survey.
The data, which reflected the impact of the pound’s slide on import prices after the Brexit vote in June, were the first hard numbers on the economy in the wake of the result.
Mongolia’s tugrik, the world’s worst-performing currency in August, weakened a 22nd day to 2,243.50 per dollar, the lowest level in Bloomberg data going back to 1993.
The currency is suffering as the nation’s government seeks ways to stabilize an economy it says is in the grip of a crisis.
Commodities
Gold advanced 1.1% to $1 353.63 an ounce amid a decline in the dollar. Silver and platinum both added more than 1.2%.
Oil gained, after erasing an earlier loss as the weakness in the dollar overtook speculation that the Organisation of Petroleum Exporting Countries will struggle to agree any kind of limit on production next month.
West Texas Intermediate crude advanced 0.6% to $46.02 a barrel and Brent gained 0.3% to $48.51.
Nickel dropped 1.5% after posting the biggest advance in more than two weeks on Monday. Copper advanced 1%.
Stocks
The MSCI Emerging Markets Index rose 0.3%, heading for the highest close since July 2015. Developing-nation shares have soared about 33% from a January low, driving valuations to the highest level in 15 months.
Qatar stocks climbed after FTSE Russell said it would relax the criteria to decide which of the nation’s shares will join its emerging-markets index next month.
The QE Index advanced 2.2%, its biggest gain since June 7 and the most among more than 90 gauges tracked globally by Bloomberg.
The long-planned stock-trading link between Hong Kong and the mainland city of Shenzhen has been approved, further opening China’s $6.5trn equity market to international investors.
Chinese Premier Li Keqiang announced the Council’s approval, according to a statement on the body’s website. No further details were revealed.
The Stoxx Europe 600 Index slipped 0.6%. A stronger euro hurts European stocks by making exports less competitive.
Schindler Holding led industrial-goods companies lower, sliding 5.6% after forecasting a decline in the global elevator and escalator market. Electrolux, which gets more than a third of its revenue from North America, lost 2.4% after a report showed US shipments of major home appliances fell in July.
Antofagasta helped push a measure of commodity producers to the best performance of the 19 industry groups on the Stoxx 600, climbing 6.4%. The company said first-half earnings rose and announcing an interim dividend of 3.1 cents a share.
Linde jumped 7.7%, propelling a gauge of chemical stocks higher, after people familiar with the matter said Praxair has held merger talks with the German industrial-gas company.
S&P 500 Index futures fell 0.1%, with the index having risen to fresh highs on Monday.
Bonds
The UK’s 10-year gilt yield was little changed at 0.53% before the Bank of England seeks to buy £1.17bn of debt due in more than 15 years as part of its expanded quantitative-easing program.
The central bank fell short of achieving a similar target at last week’s bond-buying auction, spurring gains in longer-dated gilts.
The yield on Treasuries due in a decade fell three basis points to 1.53%. Yields on similar-maturity debt in Germany decreased by one basis point to minus 0.08%.
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