Dow average reaches another record while yen slides, oil gains

Dollar Correlation

The U.S. Dollar Index, a gauge of the currency against six major peers, slipped 0.5% to 82.07 today after reaching its strongest level in more than six months yesterday.

For the first time in four years the dollar is participating in a rally that has sent stocks higher as traders in the $4-trillion-a-day foreign-exchange market bet the world’s largest economy will only strengthen. That’s unusual because the greenback has tended to move in the opposite direction to equities in recent years as investors sought a haven from the global financial crisis, sovereign bailouts in Europe and slower growth.

“This is potentially a clear turning point for the U.S. dollar,” said John Horner, a currency strategist in Sydney at Deutsche Bank AG, the world’s top foreign-exchange trading firm as measured by Greenwich Associates. “We’re now starting to get toward the point where good U.S. data is good for the U.S. dollar and good for U.S. markets, and that’s a quite different scenario to what we’ve seen over the past few years.”

Household Wealth

Household wealth in the U.S. climbed in the fourth quarter to the highest level in five years, propelled by a gain in home prices that is helping repair family finances. Net worth for households and non-profit groups increased by $1.17 trillion from October through December, or 1.8% from the previous three months, to $66.1 trillion, the Federal Reserve said today.

Concern about Europe’s debt crisis eased as the Spanish Treasury met its maximum target at a debt auction in Madrid today. Demand for the 2018 note was 2.32 times the amount sold, up from 2.24 last month. The 10-year benchmark yield was 4.917%, down from 5.202% on Feb. 21, the Bank of Spain said. That’s the lowest yield since November 2010.

The advance in Spanish bonds pushed the 10-year yield to the lowest since January. Portugal’s 10-year yield fell 22 basis points to 5.93%, also the least since January, after the nation’s credit rating outlook was raised to stable from negative by S&P, which said European lenders will probably extend support to the government and make the nation’s fiscal tightening “more sustainable.”

U.K. Easing

U.K. 10-year bond yields rose six basis points to 2.01% while the pound slipped more than 1% against the euro, Swedish krona and Danish krone. The Bank of England’s Monetary Policy Committee led by Governor Mervyn King maintained its target for quantitative easing at 375 billion pounds ($565 billion). The decision was forecast by 29 of 39 economists in a Bloomberg News survey, with the remainder having predicted an expansion of at least 25 billion pounds.

The euro’s advance lifted it from yesterday’s low of $1.2965, the weakest level since Dec. 11. The 17-nation currency appreciated 1.9% to 124.31 yen and climbed 1% to 87.22 British pence. ECB President Mario Draghi stuck to his view that the euro region will gradually recover and said the bank’s monetary policy “will remain accommodative for as long as needed.”

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