Dollar Tumbles as Yen, Euro Rally on Irma, ECB

• Dollar Tumbles as Yen, Euro Rally on Irma, ECB

The dollar tumbled to its weakest level since the start of 2015 amid fading expectations of another U.S. rate increase this year. Havens including gold and the yen rallied as North Korea tensions and natural disasters unsettled investors.

Stocks in Europe struggled for traction as the euro extended its march above $1.20, while S&P 500 index futures dropped. The dollar’s decline deepened as traders girded for economic damage to Florida from Hurricane Irma, set to make landfall on Sunday. The most powerful earthquake in a century shook Mexico, adding to investor anxiety. Ten-year Treasury yields fell toward 2 percent and gold headed for a third weekly advance ahead of a potential North Korean missile launch. Copper led most industrial metals lower and crude oil dropped.

A robust economic recovery amid stubbornly low inflation in the euro region is helping propel the common currency’s surge of more than 14 percent against the dollar this year. European Central Bank President Mario Draghi on Wednesday expressed concern about the euro’s strength without offering any suggestion on how to address it as policy makers edge toward settling the future of their bond-buying program.

“At its current level, the Euro is not a threat for the eurozone,” Philippe Ithurbide, global head of research at Amundi Asset Management, said in a report. “If the euro stabilizes, or continues a gradual appreciation path as in our base scenario, the ECB could announce — maybe in October — a reduction, starting in January 2018, of the quantitative easing program. Should the euro continue to appreciate rapidly, the ECB could become more dovish and postpone its tapering.”

Federal Reserve Bank of New York President William Dudley was the latest U.S. central banker to lay out his views ahead of a policy-setting meeting later this month as expectations for an interest-rate increase have been scaled back. Dudley reiterated the need to continue raising rates while conceding that the Fed may have to rethink its inflation model.

Meanwhile, the threat from North Korea lingers. U.S. President Donald Trump said it’s not “inevitable” that the U.S. will wind up in a war with North Korea over its continued development of nuclear weapons, though military action remains an option. Pyongyang may test a missile this weekend to coincide with its “founding day” on Sept. 9.

Stocks

• The Stoxx Europe 600 Index declined 0.1 percent as of 6:33 a.m. in New York.
• The U.K.’s FTSE 100 Index decreased 0.4 percent.
• Futures on the S&P 500 Index fell 0.3 percent.

Currencies

• The Bloomberg Dollar Spot Index decreased 0.5 percent, reaching the lowest in almost three years on its seventh straight decline.
• The euro gained 0.4 percent to $1.2071, hitting the strongest in almost three years with its fifth consecutive advance.
• The Japanese yen gained 0.9 percent to 107.48 per dollar, the strongest in 10 months on the biggest rise in more than three months.

Bonds

• The yield on 10-year Treasuries fell one basis point to 2.03 percent, the lowest in 10 months.
• Britain’s 10-year yield gained one basis point to 0.979 percent.

Commodities

• West Texas Intermediate crude fell 0.3 percent to $48.93 a barrel, the largest fall in more than a week.
• Gold advanced 0.3 percent to $1,353.94 an ounce, the strongest in about 13 months.
• Copper dipped 1.5 percent to $6,794.00 per metric ton, the lowest in more than a week on the largest decrease in more than four months.