Dollar retreats from 13-and-half-year high, pauses after rally
The dollar took a breather on Tuesday as investors consolidated the gains built on expectations of increased fiscal spending and higher inflation under a Trump administration.
An earthquake of magnitude 7.4 and the subsequent tsunami warning in northern Japan prompted knee-jerk selling of the dollar for safe-haven yen in early trade.
The dollar held steady against the yen at 110.76 yen, having pared its losses after slipping to as low as 110.27 yen earlier on Tuesday. On Monday, the greenback had set a near six-month high of 111.36 yen, which amounted to a gain of 10 percent from its Nov. 9 trough near 101 yen.
Against a basket of six major currencies, the dollar last stood at 100.87, down from its 13 1/2 year-high of 101.48 set on Friday.
Before its streak ended on Monday, the dollar index had risen for 10 straight trading days, as investors bet that increased fiscal spending by the incoming Trump administration would stoke inflation and propel interest rates higher.
Why a Fed Hike Seen as Certain as Death Itself
A Federal Reserve interest-rate increase next month is ascertain as death and taxes for bond traders, as speculation mounts that Donald Trump’s reflationary policies will mean a quicker pace of monetary tightening. The market-implied odds of action at the central bank’s Dec. 13-14 meeting reached 100 percent for the first time, according to Bloomberg calculations based on futures. An auction of two-year Treasuries Monday drew the highest yield since 2009 before a sale of five-year debt Tuesday. A bond market gauge of inflation expectations was headed for its highest close since October 2014. Societe Generale Global Head of Rates & FX Strategy Vincent Chaigneau discusses with Anna Edwards and Yousef Gamal El-Din on "Bloomberg Daybreak: Europe."
Oil prices hit highest since October on hopes of OPEC-led output cut
Oil prices rose to their highest level since late October on Tuesday as the market priced in an expected output cut led by producer cartel OPEC, but analysts warned that a failure to agree a cut could lead to a deepening supply glut by early 2017.
International Brent crude oil futures rose as high as $49.63 a barrel on Tuesday, up 1.5 percent from the last settlement and the highest since Oct. 31. Brent was trading at $49.58 per barrel at 0525 GMT, up 68 cents, or 1.4 percent.
U.S. West Texas Intermediate (WTI) crude futures were up 69 cents, or 1.4 percent, at $48.93 a barrel.
Reference: Reuters, Bloomberg
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