U.S. Treasury price volatility rose to a 5-month high as the market is concerned about the Fed meeting today and Scotland votes on independence the following day. Bank of America-Merrill Lynch’s Move index, which monitors price movements in U.S. government bonds based on option trading, climbed to 66.09 yesterday, the highest level since April 2.
Emerging-market benchmark stock index fell for the eighth day and currencies continued to weaken as China’s factory output expanded at the slowest pace since the global financial crisis. The MSCI Emerging Market Index fell 0.8% in afternoon trading, heading for the longest losing streak since last November. A gauge tracking developing-country currencies slid for the sixth day to the lowest level since 2009 with Malaysia’s ringgit and Russia’s ruble depreciating 1% against the dollar.
The dollar is heading for its ninth consecutive week of strengthening as robust U.S. retail sales in August bolstered the case for the Federal Reserve to raise interest rate. The dollar index, a measure of the greenback versus a basket of six major currencies, is on course for its longest run of weekly advances since the first quarter of 1997. Meanwhile, the greenback’s gains have pushed dollar-linked commodity prices lower, with oil prices sliding to the lowest levels in two years and gold tumbling to an eight-month low.
Continued momentum of US economic activity in the third quarter was mirrored in a strengthening labor market, despite a temporary fall in new payroll employment. The Euro Area labor market continues to remain weak amid falling inflation, creating the conditions for additional monetary easing.
The dollar rose to a 14-month high against the euro and surged to nearly a six-year high versus the yen as better U.S. economic data fueled speculation the Federal Reserve may begin raising interest rates earlier than expected, a view that pushed U.S. Treasury prices lower for a fourth day and weighted negatively on stock markets. The greenback has also benefited from diverging economic and monetary policy outlooks.
U.S. Treasuries advanced and the dollar weakened after a report showing weaker job growth in August boosted speculation that the Federal Reserve will maintain monetary accommodation for the time being. The benchmark 10-year Treasury yield slid 2 basis points (bps) to 2.44%, after climbing to an almost 1-month high of 2.47% earlier. The dollar fell from a nearly 6-year high versus the yen in early trading, and the greenback also scaled back from a 14-month high against the euro.