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Dollar hits 13-1/2 year high, US bond yields benefit on Trump impulse bets

TOKYO The dollar sprinted to a some-more than 13-1/2 year high opposite a basket of vital currencies on Friday and U.S. debt yields strike nearby one-year highs on expectations that President-elect Donald Trump’s policies will boost a U.S. economy.

But a post-election change in expectations has left many rising marketplace currencies and resources exposed if investors stagger some-more supports behind to a United States.

European shares were approaching to open marginally higher, with spread-betters looking to arise of 0.3 percent in Germany’s DAX .GDAXI and a prosaic opening for Britain’s FTSE .FTSE.

Concerns about a health of Italy’s banks and a domestic repercussions of a referendum subsequent month are rearing their head, after a widespread of a Italian 10-year debt produce IT10YT=RR over German paper DE10YT=RR had risen to a high final seen in Aug 2014.

In Asia, MSCI’s broadest index of Asia-Pacific shares outward Japan .MIAPJ0000PUS forsaken 0.4 percent to float only above a four-month low overwhelmed progressing in a week. It looked set to record a fourth true week of losses.

The dollar’s rise, however, was a bonus for Japan’s Nikkei normal .N225, that strike a 10-month high before finale 0.6 percent higher. The weaker yen has lifted hopes for better-than-expected gain for exporters.

On Wall Street, a benchmark SP 500 index .SPX rose 0.5 percent on Thursday to within a hair’s extent of a record high, as a awaiting of aloft seductiveness rates increased bank bonds and consumer discretionary bonds were helped by auspicious mercantile information and earnings.

U.S. consumer prices posted their biggest boost in 6 months, while housing starts surged to a 9-year high and jobless claims fell to a lowest turn given Nov 1973.

The information upheld a market’s stream perspective that U.S. expansion and acceleration is approaching to accelerate if a Trump administration cuts taxes and increases mercantile spending.

His protectionist position on trade could stoke U.S. acceleration by tying inflows of inexpensive imports, yet it is approaching to harm many other countries in a near-term and many investors think it will eventually repairs a U.S. economy as well.

“The United States has been heading globalisation though now electorate pronounced they had enough. They pronounced they wish to stop a tumble in their salary with mercantile spending and protectionism. This is a very, really large change in trend,” pronounced Masayuki Kichikawa, arch macro strategist during Sumitomo Mitsui Asset Management.

The U.S. elections stirred investors to embankment their once rock-solid self-assurance that a expansion in grown economies will sojourn temperate given of tough foe from rising marketplace economies with reduce wages.

As investors attempted to adjust to a new environment, a 10-year U.S. Treasuries produce US10YT=RR rose to 2.339 percent, a tip given December, compared to around 1.86 percent before a U.S. election.

The two-year U.S. Treasuries produce US2YT=RR rose to a 10 1/2-month high of 1.071 percent.

Rising yields also reflected marketplace players’ reassessment of a Fed’s process trail down a road, over a approaching rate travel in a Dec 13-14 meeting.

Federal Reserve Chair Janet Yellen told a Joint Economic Committee of Congress on Thursday that Trump’s choosing has finished zero to change a Federal Reserve’s skeleton for a rate boost “relatively soon.”

But seductiveness rates futures for 2017 are now starting to cost in one or some-more rate hikes subsequent year, a sea change from before a choosing when they labelled in a reduction than 50 percent possibility of a 2017 rate hike, presumption a dovish Yellen would be intensely discreet in lifting rates.

The dollar’s rising produce captivate is lifting a U.S. currency, that rose to 110.34 yen JPY=, a tip turn given early June. The euro EUR= slumped to $1.0620, a low final seen roughly a year ago.

The dollar’s index opposite a basket of 6 vital currencies .DXY =USD rose above a “double top” overwhelmed in Mar and Dec of 2015. The index now stands during a tip turn given Apr 2003.

“Double top” is a technical research tenure describing a banking (or other glass asset) rising to a high, falling, and afterwards rising again to a same level. Breaking a double tip is mostly seen as a bullish pointer by technical analysts.

A rising dollar is quite a problem for some rising economies that could see potentially destabilizing collateral outflows.

The Mexican peso MXN=, that has been viewed as a many exposed to Trump’s policies given of a large exports to a United States, enervated 1 percent after a executive bank lifted a process seductiveness rates by 50 basement points to urge a currency, as a marketplace had approaching a bigger hike.

The Turkish lira TRYTOM=D3 strike a record low, carrying depressed some-more than 8 percent so distant this week, strike by signs of some-more conflict between Turkey and Europe.

Gold XAU= slumped to 5 1/2-month low of $1,205.9 per unit and oil prices, that have been upheld by hopes a Organization of a Petroleum Exporting Countries (OPEC) would strech an agreement to top prolongation during a assembly in Vienna on Nov. 30, were strike by a dollar’s strength.

Brent wanton futures LCOc1 fell 0.7 percent in Asia to $46.19 per barrel, down serve from Thursday’s two-week high of $47.62.

(Reporting by Hideyuki Sano; Editing by Simon Cameron-Moore and Kim Coghill)

Article source: http://www.reuters.com/article/us-global-markets-idUSKBN13D040