A dollar gauge rallied the most in eight weeks as the Federal Reserve acknowledged surprise in the improvement in the U.S. labor market and amid heightened geopolitical turmoil.
A basket of emerging-market currencies fell against the dollar this week as Russia and Ukraineblamed each other for the downing of a Malaysian Airline System Bhd. plane and Israel’s military began a Gaza ground incursion. The euro dipped below $1.35 for the first time in five months on diverging central-bank policies. Canada’s dollar climbed to the strongest level in a week after an inflation gauge rose. The Labor Department may report July 22 that consumer prices increased in June.
“The data shows the economy here is coming along,” Robert Lynch, a currency strategist at HSBC Holdings Plc in New York, said yesterday in a telephone interview. “You have the beginnings of policy normalization in the U.S.”
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, gained 0.3 percent to 1,009.53 in New York, the biggest weekly increase since May 23. The benchmark touched 1,011.12, the highest since June 20.
The yen fell less than 0.1 percent to 101.34 per dollar on the week, and rose 0.6 percent to 137.08 per euro for a second weekly gain. The euro slid 0.6 percent to $1.3524, the biggest drop since June 13.
Alcoa jumped 6 percent after kicking off earnings season with better-than-forecast results. American Airlines Group Inc. rallied 4.1 percent after raising its margin forecast. Facebook Inc. advanced 2.9 percent to pace gains among a gauge of technology shares. Bob Evans Farms Inc. slid 4.2 percent as quarterly revenue missed estimates.
The Standard & Poor’s 500 Index (SPX)added 0.3 percent to 1,969.21 at 1:06 p.m. in New York after slumping 1.1 percent over two days. The Dow Jones Industrial Average (INDU) gained 43.71 points, or 0.3 percent, to 16,950.33. The Russell 2000 Index was little changed following its biggest two-day drop since April. Trading in S&P 500 stocks was in line with the 30-day average at this time of day.
“The market can go down, but it won’t stay down,” John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York, said in a phone interview. “The fact that the market is still questioning all these things that are going on is a very healthy sign. I still think the Fed is going to be more concerned about making absolutely sure that the U.S. economic recovery is under way and staying under way.”
U.S. equities retreated a second day yesterday amid growing investor concern that stocks have rallied too fast after benchmark indexes ended last week at all-time highs. Raymond James & Associates Inc. said stocks are vulnerable to losses and Citigroup Inc.’s chief U.S. equity strategist cited concerns for a “severe” pullback.
The Pakistan rupee’s biggest rally in 16 years has been nothing but a tease for Nazim Salim.
Seeing it as an opportunity to settle an old debt in dollars cheaply, he sought out Karachi’s money changers to buy $200. Yet all four traders Salim approached in the kerb market, as it is known to Pakistanis, had the same answer: They had no dollars to sell him.
The hoarding of greenbacks in the kerb market, where a fifth of Pakistan’s foreign-exchange transactions are conducted, shows money changers are unconvinced the local currency’s gains will last. While the rupee has been lifted to a nine-month high by pledges of more than $8 billion in foreign aid, the nation’s economy remains hampered by a deteriorating trade balance, power shortages and a Taliban insurgency in the north.
“With the dollar now in a big, rare retreat, I figured this is the perfect time to end this debt,” Salim said over the sound of vendors hawking tea, biryani and tobacco in the streets below the apartment where he makes and sells dental crowns. “I couldn’t believe it.”
After losing 46 percent of its value over 10 straight years of declines, the rupee has gained 7.5 percent in 2014, touching 97.6 per dollar on March 24, the strongest since June 4, before closing at 97.96 yesterday. Its 7.1 percent advance this month is the best performance among all currencies tracked by Bloomberg.