The US dollar hit a fresh two-decade peak against a basket of currencies on Wednesday on the back of rising Treasury yields.
According to Reuters, the safe-haven dollar has been a major beneficiary from the rout in sterling, rising to a fresh 20-year peak of 114.680 against a basket of currencies.
The dollar held at 144.75 yen, testing the resolve of the Japanese authorities to protect the 145.00 level after last week’s intervention.
Sterling was under fire again at $1.0644, with its bounce from Monday’s record trough of $1.0327 stopping far short of the $1.1300 level held before last week’s UK Budget.
Yields on British 10-year gilts have risen a staggering 119 basis points in just four sessions to reach 4.50%, the sharpest such move since at least 1979.
The euro slipped anew to $0.9552 and back toward last week’s two-decade low of $0.9528.
The dollar also touched a record high on the offshore-traded Chinese yuan at 7.2387, having risen for eight straight sessions.
The mounting pressure on emerging market currencies from the dollar’s rise is in turn adding to risks that those countries will have to keep lifting interest rates and undermine growth.
The ascent of the dollar and bond yields has also been a drag for gold, which was hovering at $1,624 an ounce after hitting lows not seen since April 2020.
Oil prices fell again as demand worries and the strong dollar offset support from U.S. production cuts caused by Hurricane Ian.
Brent fell $1.17 to $85.03 a barrel, while U.S. crude lost $1.10 cents to $77.40 per barrel.
Surging rates and slowing growth is not a good mix for equities and MSCI’s broadest index of Asia-Pacific shares outside Japan fell 2.0% to its lowest since April 2020.
Japan’s Nikkei shed 2.2% and South Korean stocks fell 3.0% to a two-year low. Chinese blue chips lost 0.7%.
S&P 500 futures got caught in the bearish mood and slipped 0.8%, while Nasdaq futures dropped 1.0%. This would be the S&P 500‘s seventh session of losses and threaten the technically-important 200-week average at 3,590.
EUROSTOXX 50 futures fell 1.0%, while FTSE futures lost 1.1% as European borrowing costs blew out. (NewsWire)