By Alan Soughley
The dollar weakened and government bonds advanced on speculation the Federal Reserve will be slow to raise interest rates amid uneven global growth.
The greenback slid against all of its major peers, dragging the Bloomberg Dollar Spot Index down to a six-week low. A gauge of emerging-market currencies climbed to the highest level since July 2015. Metals were also boosted by the dollar’s retreat, with palladium, tin and zinc rising to the highest in a year. Oil fell as U.S. stockpiles expanded and Saudi Arabia was said to have raised July production to a record. U.K. government bonds extended gains after the Bank of England indicated it will stick with its current quantitative-easing plans. European stocks were little changed and most Asian shares fell.
“The market is pricing in less chance of a fed rate hike,” said Steven Saywell, head of currency strategy at BNP Paribas SA. “You had a big increase in U.S. Two-year yields on Friday on the back of the payrolls and the market has steadily reduced that.”
Speculation borrowing costs will stay unchanged for longer was reinforced by data Tuesday showing the productivity of American workers unexpectedly declined for a third quarter in the three months through June. Only about a one-in-four chance of a rate increase has been priced in for its September meeting. Global equities climbed over the last four days on optimism central banks from London to Tokyo will keep expanding stimulus. The Reserve Bank of New Zealand is forecast to lower its benchmark interest rate to a fresh record.