Published: Thu, March 14, 2019
Finance | By Loren Pratt

Dollar pulls back from 9-day low as pound's rally tapers off

Dollar pulls back from 9-day low as pound's rally tapers off

The U.S. dollar was softer on Wednesday after new inflation data bolstered the likelihood U.S. interest rates will not be raised anytime soon, while sterling rose ahead of a vote by Britain's parliament on a proposal that would rule out a "no deal" exit from the EU.

USA producer prices edged barely higher in February, in the smallest annual increase since June 2017, the latest sign of tame inflation that supports the Federal Reserve's "patient" approach to future interest rate hikes.

Japan's Nikkei rose 0.5 percent while Australian and New Zealand shares each added 0.2 percent.

U.S. stocks advanced broadly with all 11 of the S&P 500's sectors rising, boosted by health care and energy, which also lifted shares in Europe.

A Fed on hold for hiking rates suggests concern about economic growth, which can be seen in a narrowing gap between 10-year and two-year US Treasury yields, Geraghty said.

"An inverted yield curve has historically been an indicator of recession", he said.

MSCI's gauge of stocks across the globe gained 0.51 percent while the FTSEurofirst 300 index of leading European shares closed up 0.69 percent.

The Dow Jones Industrial Average was lower after Boeing's two-day rout topped 11%, when Europe's aviation authority banned the troubled aircraft.

The greenback had taken a knock as the pound rallied more than 2 per cent after British lawmakers voted against a potentially disorderly "no-deal" departure from the European Union late.

The euro increased 0.4 percent to $1.1337, the strongest in a week.

U.S. Treasury yields rose on Wednesday after falling the previous session, as risk appetite improved and equity markets stabilized, with a poor 30-year bond auction further lifting rates. The pound started the day higher after Prime Minister Theresa May announced a revised divorce deal, but dropped by as much as 1.1% versus the dollar as Attorney General Geoffrey Cox said the risks surrounding the Irish backstop - a major sticking point for those who support Brexit - were unchanged.

In afternoon trading, USA 10-year note yields rose to 2.612 percent from 2.605 percent late on Tuesday.

"After yesterday's CPI data, yields fell".

US/CAD: The Canadian dollar strengthened to a nine-day high against its US counterpart on Wednesday, as rising stocks and oil prices offset domestic data showing the fifth consecutive monthly decline for home prices.

US crude stocks fell last week as refineries hiked output, the Energy Information Administration said. But sentiment is now positive given the sharp year-to-date gains for China (nearly 20%), although the rally here has stalled a little over the past few days, while in the United States the S&P 500 hit a new high for the year yesterday. West Texas oil was boosted by a decline in US crude and fuel stockpiles added to evidence of a tightening market.

Gold climbed 0.7 percent to $1,311.06 an ounce, the highest in nearly two weeks.

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