Dollar index climbs to nine-month high as commodities decline

Report out today on manufacturing

The Dollar Index rose to the highest level in more than nine months as improving U.S. growth spurred speculation policy makers may curb stimulus. Commodities fell, while European stocks advanced and the pound rallied.

The gauge used to track the U.S. currency against six of the country’s trade partners climbed 0.3 percent to 83.816 at 6:20 a.m. in New York. The euro weakened 0.3 percent to $1.2882 after data showed the region’s economy shrank more than forecast in the first quarter, while the pound strengthened after Bank of England Governor Mervyn King said a recovery is “in sight.” The Stoxx Europe 600 Index rose 0.4 percent, while Standard & Poor’s 500 Index futures slid less than 0.1 percent. Silver and gold led the S&P GSCI index of 24commodities 0.5 percent lower.

A report today will probably show manufacturing in the New York region picked up this month after data earlier this week indicated U.S. retail sales unexpectedly advanced in April. Bank of America Corp. and JPMorgan Chase & Co. this week cut 2013 growth estimates for the world’s second-biggest economy to 7.6 percent after April industrial production and fixed-asset investment trailed forecasts.

“Dollar bulls will be watching for the Empire Manufacturing data and anything that provides a clue as to where the U.S. economy will be going,” said Neil Jones, the head of hedge-fund sales at Bank Ltd. in London. “Expectations are firming for U.S. employment to move to the 6.5 percent level and signal the end of QE. Funds are moving away from the euro given further evidence of a major slowdown.”

Extending Recession

Gross domestic product in the euro area fell 0.2 percent after a 0.6 percent decline in the previous three months, the European Union’s statistics office said today. The median of 39 estimates in a Bloomberg News survey was for a 0.1 percent contraction.

The dollar advanced against all but three of its 16 major counterparts. It appreciated 0.3 percent against the Swiss franc to the highest since August. U.S. Treasuries rose, pushing the 10-year yield two basis points lower to 1.95 percent.

The pound strengthened against its main counterparts, climbing 0.3 percent versus the euro and 0.2 percent to $1.5238. BOE Governor Mervyn King presented his final forecasts with an improved outlook for U.K. economic growth.

Italy’s 30-year bond yield added one basis point to 4.80 percent after touching 4.89 percent, the highest since April 26.

The cost of insuring European corporate bonds rose to a two-week high, with the Markit iTraxx Europe Index of 125 investment-grade companies adding two basis points to 98 basis points.

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