Dollar rally falters as treasuries gain with gold

Bloomberg

The dollar faced further headwinds as Chinese efforts to stem capital outflows and a rethinking of Federal Reserve intentions conspired to halt the strongest rally in the currency in more than a decade. Gold rose with Treasuries.
The greenback weakened a second day after reaching a 14-year high, as a record of Fed deliberations signaled central bankers remain committed to gradual rate hikes amid concern dollar strength could slow growth. The yield on 10-year Treasury notes slid below its level prior to the Fed meeting. US stocks slipped as results from major retailers missed estimates, raising concern about the strength of the American consumer. The offshore yuan surged the most on record and gold hit the highest in a month.
The growing backlash against the dollar coincides with more-sober outlooks on whether President-elect Donald Trump’s plans to boost government spending will achieve rapid reflation. The Fed reiterated that a “gradual” pace of rate hikes over the coming years would likely remain appropriate, damping speculation officials will step in to counter inflation with higher rates. Stocks have rallied with the dollar, while Treasuries have plunged since Trump’s election.
“In the past two months it’s really been the US versus the rest of the world,” said Simon Quijano-Evans, a strategist at Legal & General Group Plc in London. “Maybe there will be some wind taken out of the sails. As we move towards the end of January and the lunar new year holidays, the Chinese authorities are being overly cautious to prevent a rout.”
The S&P 500 Index dropped 0.2 percent to 2,266.97 by 9:31 a.m. in New York, putting stocks on course for their first decline in three days. The index is within five points of an all-time closing high. Kohl’s Corp. plunged 16 percent, Macy’s Inc. lost 12 percent and Gap Inc. fell 5.5 percent to pace declines after the retailers reported disappointing holiday results. The Stoxx Europe 600 Index was little changed after falling 0.1 percent Wednesday to halt a three-day advance that took the measure into a bull market.
The dollar declined against most of its Group of 10 currencies while a Bloomberg gauge of the greenback extended declines, trading 0.6 percent lower after companies added fewer jobs than forecast in December, according to a private research group. The offshore yuan surged 0.5 percent after advancing 1.4 percent Wednesday. The euro gained 0.2 percent to $1.0513. Russia’s ruble advanced 1.5 percent, one of the top two performers among 31 major world currencies after breaching 60 per dollar for the first time since July 2015. Mexico’s peso erased losses after the central bank sold dollars to bolster its currency.

COMMODITIES
Crude rose 0.7 percent to $53.61 a barrel in New York on signs stockpiles are set to fall and OPEC members will proceed with agreed production cuts. Gold rose 1 percent to the the highest level in almost a month. Aluminum led base metals higher with a 0.7 percent gain. Nickel rose 0.3 percent and zinc was up 0.4 percent.

BONDS
US Treasuries edged higher, with the yield on the 10-year benchmark falling two basis points to 2.423 percent. Spanish bonds declined, and French bonds erased gains, after the nations sold bonds.