The dollar had plummeted in the past two sessions on the view that weak domestic economic data and worries over the global economy could prevent the Fed from hiking rates this year. The FTSE 100 index of leading British shares outperformed its counterparts, trading 0.8 percent higher at 5,882.
USA stocks eked out a second straight day of gains on Thursday as a weaker dollar helped materials shares by lifting commodity prices, though disappointing forecasts from retailers and anxiety ahead of Friday’s non-farm jobs report limited the advance.
The Dow Jones industrial average rose 75.6 points, or 0.46 percent, to 16,412.26, the S&P 500 gained 4.67 points, or 0.24 percent, to 1,917.2 and the Nasdaq Composite added 7.06 points, or 0.16 percent, to 4,511.30.
On Wednesday, the private ISM survey found that the USA service sector grew in January at the slowest rate in almost two years.
That shift in thinking about USA interest rate policy is pushing the value of the dollar down, a development that is positive for commodities and for US multinationals that do a lot of business overseas.
The dollar was placed under pressure after dovish comments made by New York Fed President Bill Dudley, who said in an interview with MNI that global financial conditions have tightened markedly since the Federal Reserve lifted interest rates in December and the central bank will have to take that into account if the situation persists into March.
“There is a general skepticism towards a proper rate hike, cycle by the Fed – that’s been driving down the dollar (but)there’s probably not that much room left for dollar weakness”, Commerzbank currency strategist Thulan Nguyen, in Frankfurt. Fed fund futures, a security that allows investors to bet on which way the Fed will move interest rates, are indicating that the next best chance the Fed will raise rates is not until early 2017.
Hong Kong’s Hang Seng rose 0.6 percent and Malaysian and Singapore stocks also gained. Japanese shares sagged on the strengthening yen. Australia’s S&P/ASX 200 rose 2.1 percent to 4,980.40.
A man looks at an electronic stock indicator of a securities firm in Tokyo, Thursday, Feb. 4, 2016. Crude oil prices dipped, trimming some of the gains made earlier in the week that had brought some relief to risk asset markets. Japan’s Nikkei 225 lost 0.8 percent to 17,044.99. The euro eased to $1.1151 from $1.1199, which was its highest in more than three months.
The dollar index, which measures the greenback against a basket of six major currencies, reached a session high of 97.236 after hitting a roughly 15-week low of 96.259 Thursday .DXY . The index was on track to end the week, 0.3 percent lower. Brent crude, a benchmark for worldwide oil prices, lost 46 cents, or 0.5 percent, to $34 a barrel in London. The contract jumped 8 percent on Wednesday in NY.