October 7, 2010 / 4:26 PM / 9 years ago

GLOBAL MARKETS - U.S. dollar's weakness boosts commodity prices

NEW YORK (Reuters) - The U.S. dollar slid to a 15-year low against the Japanese yen and gold set another fresh high on Thursday after data on U.S. unemployment benefits did little to budge expectations that the Federal Reserve will boost money supply.

Traders are pictured at their desks in front of the DAX board at the Frankfurt stock exchange October 1, 2010. REUTERS/Remote/Kirill Iordansky

The weak U.S. dollar helped crude oil to rise above $84 a barrel to a five-month high before it eased, while copper hovered just under two-year highs as investors snapped up commodities on the prospect new money will boost asset prices.

The dollar slumped to an all-time low against the Swiss franc while the Australian dollar surged to a 27-year high against the U.S. currency.

The dollar fell below 82.87 to the yen, about the level that led the Bank of Japan to intervene in markets for the first time in six years last month, while the euro rose above 1.40 before easing some of its gains.

“It’s still the same story purely driven by financial markets, particularly the falling U.S. dollar, which pushes up commodity prices in dollar terms across the board,” said Carsten Fritsch, analyst at Commerzbank in Frankfurt.

FEDERAL RESERVE EASING STILL EXPECTED

Shorter-dated U.S. Treasuries made slight gains on safe-haven buying spurred by market expectations that the Federal Reserve will embark on more quantitative easing and some nervousness before Friday’s non-farm payrolls data.

Signs of some improvement in the troubled labor market from a report showing new U.S. claims for unemployment benefits fell to a near three-month low last week did not alter the view that the Fed will soon roll out a new asset purchasing program.

Initial claims for state unemployment benefits dropped 11,000 to a seasonally adjusted 445,000, the lowest since the week of July 10, the Labor Department said. Analysts polled by Reuters had forecast claims edging up to 455,000.

“We are getting a lot of mixed signals in the labor market — there is a good deal of uncertainties with tomorrow’s payroll number,” said Robert Dye, senior economist at PNC Financial Services in Pittsburgh.

Global stocks hovered near break-even as investors tried to assess the prospect of quantitative easing and the correlation between the euro and equities.

“Everybody is trying to play this quantitative easing idea: what are the central banks going to do. That certainly feels like part of it,” said Kevin Kruszenski, head of listed trading at KeyBanc Capital Markets in Cleveland.

Both MSCI’s all-country world equity index and the FTSEurofirst 300 index of top European shares were up just 0.1 percent, while Wall Street edged ahead about the same.

At 10:30 a.m. (1430 GMT), the Dow Jones industrial average was up 4.62 points, or 0.04 percent, at 10,972.27. The Standard & Poor’s 500 Index was up 1.08 points, or 0.09 percent, at 1,161.05. The Nasdaq Composite Index was up 10.06 points, or 0.42 percent, at 2,390.72.

The benchmark 10-year U.S. Treasury note traded at break-even to yield 2.39 percent, while the 2-year U.S. Treasury note was up 1/32 to yield 0.37 percent.

The dollar fell against a basket of major currencies, with the U.S. Dollar Index down 0.10 percent at 77.305.

The euro was down 0.01 percent at $1.3934. Against the yen, the dollar was down 0.74 percent at 82.30.

U.S. light sweet crude oil fell 25 cents to $82.98 barrel after earlier hitting $84.43 a barrel.

Spot gold prices fell $6.20 to $1,342.20 an ounce after hitting an all-time peak of $1,364.60 earlier in the day.

The MSCI index of Asia Pacific stocks outside Japan was up 0.29 percent to the highest since June 2008. Japan’s Nikkei share average slipped 0.1 percent but for the week was still up about 3 percent.

Reporting by Chuck Mikolajczak, Nick Olivari, Chris Reese in New York; Alex Lawler, Amanda Cooper, Kirsten Donovan, George Matlock and Marie-Louise Gumuchian in London; Writing by Herbert Lash

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