The dollar tumbled to its weakest level since the start of 2015 amid fading expectations of another U.S. rate this year. Stocks declined and havens including gold and the yen rallied as North Korea tensions and natural disasters unsettled investors.
The dollar’s decline deepened as traders girded for economic damage to Florida from Hurricane Irma, set to make landfall on Sunday. The most powerful earthquake this century shook Mexico, adding to investor anxiety and sending the peso weaker. The euro extended its march above $1.20 as 10-year Treasury yields fell toward 2 percent. Gold headed for a third week of advance ahead of a potential North Korean missile launch, while copper led most industrial metals lower and crude oil dropped.
A robust economic recovery amid stubbornly low inflation in the euro region is helping propel the common currency’s surge of more than 14 percent against the dollar this year. European Central Bank President Mario Draghi on Wednesday expressed concern about the euro’s strength without offering any suggestion on how to to address it as policy makers edge toward settling the future of their bond-buying program.
Federal Reserve Bank of New York President William Dudley was the latest U.S. central banker to lay out his views ahead of a policy-setting meeting later this month as expectations for an interest-rate increase have been scaled back. Dudley reiterated the need to continue raising rates while conceding that the Fed may have to rethink its inflation model.
Meanwhile, the threat from North Korea lingers. U.S. President Donald Trump said it’s not “inevitable” that the U.S. will wind up in a war with North Korea over its continued development of nuclear weapons, though military action remains an option. Pyongyang may test a missile this weekend to coincide with its “founding day” on Sept. 9.
Currencies
The Bloomberg Dollar Spot Index fell 0.3 percent to 1,134.35, reaching the lowest in almost three years on its seventh straight decline.
The euro gained 0.2 percent to $1.2051, hitting the strongest in almost three years with its fifth consecutive advance.
The Japanese yen climbed 0.8 percent to 107.63 per dollar, the strongest in 10 months. - Bloomberg -