Dollar strengthens as global growth and inflation fears mount

Buyers sought out the security of the greenback and offered the euro as fears over additional rate of interest rises and slowing international financial progress stalked markets.

The greenback index, which measures the energy of the US forex in opposition to a basket of six others, rose 0.9 per cent to 104.82 factors, a stage it final touched in 2002. Different main currencies weakened, with the euro down as a lot as 1.5 per cent at $1.035, its lowest level since 2017.

Inventory markets gave up earlier good points, including to heavy falls within the earlier session, with the S&P 500 down 1.3 per cent and the tech-heavy Nasdaq Composite down 1.4 per cent.

Costs of key commodities similar to copper fell, and yields on longer-term bonds had been once more below strain as issues about US financial progress dogged traders.

“The Fed is below strain to lift charges once more and the transfer must be fast into the summer time. Then we’ll see an affect on [economic] progress within the second a part of the 12 months,” stated Juliette Cohen, a strategist at CPR Asset Administration.

Sterling fell 0.5 per cent in opposition to the greenback, as information exhibiting that the UK economic system unexpectedly shrank for the primary time this 12 months heaped additional strain on British forex. China’s renminbi misplaced 1 per cent to six.78 per greenback, within the newest signal that Beijing authorities are allowing the tightly managed forex to weaken to stimulate flagging demand for the nation’s exports.

Analysts at ING wrote that, given fears of an financial slowdown and additional charges tightening, “it isn’t shocking to see the greenback stay sturdy”. 

European equities pulled again a few of their early losses however US markets struggled for course following heavy falls on Wednesday.

In Europe, the Euro Stoxx 600 completed down 0.7 per cent, whereas the FTSE 100 ended down 1.6 per cent. Japan’s Topix and Hong Kong’s Hold Seng closed 1.2 per cent and a pair of.2 per cent decrease respectively.

Robert Buckland, an analyst at Citi, stated: “World equities are transferring to cost within the three key stagflation themes: greater inflation, slowing progress, and rising charges.”

In bond markets, the 10-year Treasury yield fell by 0.07 proportion factors to 2.85 per cent. Yields fall as bond costs rise.

Development can be below strain from declining coronavirus pandemic-era fiscal assist, provide chain bottlenecks and a slowdown in China pushed by stringent coronavirus lockdowns, Cohen added. “That’s a dark atmosphere for markets,” she stated.

The worth of copper, an indicator of financial sentiment as a result of steel’s widespread use, dropped beneath $9,000 per ton for the primary time in additional than six months.

“Chinese language demand is extraordinarily weak,” stated Colin Hamilton, analyst at BMO Capital Markets, though smelter constraints that had held up costs in China had now eased.

Extra reporting by Neil Hume and Jennifer Creery