THE dollar hit a one-month high yesterday after data pointed to an improving US labour market while Wall Street rose as investors set aside recent worries whether a rally would continue.
But global stocks fell as Ireland’s borrowing costs hit another euro lifetime high and investors worried that a Federal Reserve move announced last week to buy $600bn in Treasury debt to bolster the US economy may have unintended consequences.
The dollar extended gains as a rise in US bond yields for most of the session prompted traders to reduce bets against the greenback.
Oil prices soared to their highest level in 25 months, breaking their recent strong inverse correlation with the dollar.
Investors have sold dollars in recent months and bet that the Fed’s plans to pump more money into the US economy to boost growth would drive already low US rates even lower. So far, those expectations have been frustrated.
“The US yield curve has steepened, and since the whole world has had the same position on, we’ve got a lot of end-of-the-year, risk management going on,” said Sebastien Galy, senior currency strategist at BNP Paribas.
The euro fell as low as $1.3671 and was last changing hands at $1.3777, barely lower on the day.
The dollar climbed as high as 82.79 Japanese yen, up more than 1.0 per cent, and last traded at 82.23.
A decline in initial US jobless claims had some analysts suggesting the American economy was starting to gain traction after months of sluggish growth.
US stocks gained as rising oil prices lifted energy shares and banks rebounded after suffering three per cent losses over the past two sessions.
The Dow Jones industrial average closed up 10.29 points, or 0.09 per cent, at 11,357.04.
The Standard & Poor’s 500 Index gained 5.31 points, or 0.44 per cent, at 1,218.71.
The Nasdaq Composite Index rose 15.80 points, or 0.62 per cent, at 2,578.78.
US Treasuries slid in volatile trade after a weak auction of 30-year government debt, although bargain hunting pulled bonds off the day’s lows and led a rebound.