Dollar powers to 29-month high, stocks stay standing despite weak data

LONDON (Reuters): The dollar bulldozed almost everything in its path on its way to a 29-month high on Tuesday, as a blizzard of soft global data left the U.S. economy as the only one still looking in reasonable health.

European stocks and the euro both suffered shaky starts as euro zone manufacturing data showed the sharpest contraction in almost seven years, but it was by no means the only alarm bell ringing.

Australia’s dollar AUD=D4 had tumbled overnight after its central bank cut interest rates in its trade war-hit economy for the third time this year. That in turn dragged the neighboring Kiwi dollar NZD=D4 to a 4-year low.

“On we go with the dollar,” said Societe Generale strategist Kit Juckes. 

“It is the pick of the major economies and I don’t think anything is going to change (for the dollar) until the economy slows.”

“If you are very sensitive to global trade and sensitive to manufacturing you are having a very tough time of it at the moment, there is no doubt about it.”

The dollar index against a basket of major currencies rose 0.2% to 99.585, its highest level since May 2017.

Bond markets were also grumbling after a weak auction of Japanese government debt underscored the lack of enthusiasm for the negative interest rates that more and more countries will be heading toward if economies and inflation stay weak.

That worry fed across to higher bond yields across major markets, with 10-year German, French and Spanish and US Treasury yields all up 2 to 4 basis points.

Economic surprise indexes published by Citigroup for the United States and Europe showed an increased divergence. The former is at its highest in nearly two years; the latter has fallen to a 2019 low.

It wasn’t all gloomy though. In Asia, the world’s largest contract chipmaker TSMC (2330.TW) of Taiwan jumped 2.9% to hit an all-time high.

MSCI’s broadest index of Asia-Pacific shares outside Japan had inched up 0.23% while Japan’s Nikkei .N225 rose 0.6% and Australia’s benchmark by 0.8%, some of that coming after the central bank rate cut.

Back in the currency market, the euro traded at $1.0888 EUR=, having slipped to a near 2 1/2-year low.

The yen was slightly weaker at 108.24 yen to the dollar JPY=, not far from last month’s low of 108.48 too.