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 As the dollar scaled a six-year peak on the yen and a 14-month top
against the euro, gold sagged to a three-month low and Brent oil was
at the $100-a-barrel mark.
Wall Street trading was expected to start slowly but investors were
eagerly awaiting the launch of new products by Apple later in a
much-hyped event in California.
Apple has fed high expectations, with promises by executives that
the company's best product pipeline in 25 years is being readied
inside its secretive facilities.
Giving the dollar bulls encouragement was research from San
Francisco Fed economists that showed investors are pricing in a
slower pace of interest rates rises than members of the Fed itself
are.
The dollar index, which benchmarks the greenback against six other
major currencies, climbed to a 14-month high of 84.519 before
ducking back to 84.315. A break above 84.753 would take it to highs
not seen since July 2010.
"(The Fed research) has reinforced the stronger dollar trend that
has been in place for the last couple months," said Lee Hardman, a
currency strategist at Bank of Tokyo Mitsubishi in London.
"As we move forward we think we will increasingly see monetary
policy diverge between the Fed and the other major central banks,
and that is likely to be supportive for further gains against the
euro and the yen."
Reassessment of the U.S. rate outlook drove emerging market stocks
down 0.65 percent to one-week lows, though a delay in EU sanctions
fueled a rebound in Russian assets.
European shares were again subdued, having been buffeted on Monday,
particularly in London, by strong signs that the campaign for an
independent Scotland was gaining momentum.
The FTSE share index, Frankfurt's Dax and the CAC 40 in Paris all
barely budged, while disappointing Greek data saw its stocks drop
more than 1 percent and hurt Spanish and Portuguese markets.
Sterling, having seen its biggest fall in over 2-1/2 years on
Monday, was steadier but stayed rooted at 10-month lows.
A second opinion poll released overnight again showed a marked
increase in support for Scottish independence just nine days before
the country votes on whether to break away from the United Kingdom.
The TNS poll found support for the 'yes camp had risen six points to
38 percent, just a pip behind the 'No' vote at 39 percent. That
followed a weekend YouGov poll showing approval of independence at
51 percent against the unity camp's 49 percent, the first this year
to find a majority for a 'Yes' vote.
DOLLAR STRENGTH
The stronger dollar remained the day's overarching theme however.
Oil and gas stocks underperformed as a result of the lower crude
price while European bonds were being dragged around by rising U.S.
Treasury yields.
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Ten-year treasuries rose back above 2.5 percent in Europe, up from a
low of 2.3870 touched last Friday after a soft August payrolls
report.
The greenback's momentum was beginning fade after it raced to a high
of 106.33 yen, while the euro slumped as low as $1.2858. Investors
were already giving the common currency a wide berth after the
European Central Bank surprised on Thursday with a fresh round of
stimulus.
A falling yen tends to be viewed as positive for Japanese exporters
and corporate profits, and helped nudge the Nikkei share index to
its highest close since January.
Other Asian markets were subdued by the dollar though the CSI300
index of leading Shanghai and Shenzhen A-share listings edged higher
again, having put in its best performance in a year last week with
gains of almost 5 percent.
That came as China's central bank also hiked the fixing for the yuan
against the dollar to send it to a six-month high.
"The PBOC (central bank) has been set stronger midpoints since May
when China's exports and trade surpluses have been recovering,
guiding the yuan up gradually," said one trader.
The gains for the dollar meant pressure for commodities, with gold
down at $1,255.40 an ounce after losing more than 1 percent on
Monday.
Brent crude oil slumped as far as $99.36 a barrel overnight, the
lowest since May 2013. But as the dollar started to flag, Brent
managed to claw back above $100 with U.S. crude popping up too to
$93.83.
The latest price drop has led to expectations of an OPEC output cut
when Gulf Arab oil ministers gather on Thursday in Kuwait for the
organization's annual meeting.
"Oil at below a $100 a barrel is a little bit risky in the current
market - $100 per barrel is really a central point for oil
countries," Tetsu Emori, a commodity fund manager at Japan's Astmax
said.
(Additional reporting by Keith Wallis in Singapore and Wayne Cole in
Sydney, editing by John Stonestreet)
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