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Dollar sinks on stock losses, falling bond yields

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10/11/2018 | 05:06pm EDT
U.S. dollar banknote is seen in this picture illustration

NEW YORK (Reuters) - The dollar fell to a near two-week low on Thursday against a basket of currencies as traders pared greenback holdings on lower U.S. Treasury yields and further equity losses on Wall Street.

A weaker-than-forecast rise in U.S. consumer prices in September reduced bets on a faster pace of interest rate increases by the Federal Reserve, further eroding the dollar's appeal.

"We are seeing investors taking some risks off the table," said Paresh Upadhyaya, director of currency strategy at Amundi Pioneer Investments in Boston. "The dollar didn't get any mileage from the CPI number."

Against the dollar, the euro climbed to a one-week peak as minutes of the European Central Bank's policy meeting last month suggested policy-makers have not abandoned their plan to end the ECB's 2.6 trillion-euro bond-purchase programme this year.

The Swedish crown jumped following stronger-than-expected inflation and home price data, raising prospects for the Riksbank to increase interest rates in December, analysts said.

The Chinese yuan rose in offshore trading, rebounding from early weakness due to a global equity rout. Traders brushed off comments from U.S. President Donald Trump signalling he is not backing off on escalating his trade war with Beijing.

The U.S. Labor Department said on Thursday its consumer price index rose 0.1 percent in September, less than the 0.2 percent increase forecast among analysts polled by Reuters.

The CPI miss reduced bets that U.S. inflation is accelerating, spurring appetite for U.S. government bonds. This added to the safe-haven bid for Treasuries stemming from another sharp sell-off on Wall Street.

An index that tracks the dollar versus six currencies <.DXY> fell to 94.987, the lowest since Sept. 28. At 3:45 p.m. (1945 GMT), the dollar index was down 0.5 percent at 95.034.

The benchmark 10-year U.S. Treasury note yield <US10YT=RR> fell to a one-week low at 3.1423 percent. It reached a seven-year peak at 3.261 percent on Tuesday.

The Japanese yen <JPY=EBS> and Swiss franc <CHF=EBS>, which are the preferred currencies in times of market turbulence, received mild safe-haven bids, gaining 0.16 percent and 0.04 percent versus the greenback.

Forecasts from Fed officials released last month showed they expected three rate hikes in 2019, and some have said they are open to a rate increase in December, which would be the fourth this year.

Their counterparts at the ECB seemed on track, based on the latest minutes, to normalise their ultra-loose policy this year despite concerns about slowing growth in Europe.

The euro zone common currency <EUR=EBS> was up 0.65 percent at $1.15925 after touching a one-week high. It was 0.45 percent higher at 129.885 yen.

The Swedish crown was 1.69 percent higher at 8.9770 per dollar and 1.12 percent stronger at 10.4068 per euro.

Offshore yuan <CNH=EBS> rose 0.74 percent to 6.8720 per dollar, rebounding from an eight-week low set earlier on Thursday.

(Additional reporting by Saikat Chatterjee in London; Editing by James Dalgleish and Nick Zieminski)

By Richard Leong

Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL 0.25% 25914.1 Delayed Quote.11.09%
NASDAQ 100 0.26% 7326.281498 Delayed Quote.15.43%
NASDAQ COMP. 0.34% 7714.477933 Delayed Quote.15.87%
S&P 500 0.37% 2832.94 Delayed Quote.13.01%
US DOLLAR INDEX 0.00% 96.6 End-of-day quote.-0.09%
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