Weak dollar, tame U.S. inflation boost stocks; gold up

By Caroline Valetkevitch

NEW YORK (Reuters) – Increasing expectations the U.S. Federal Reserve will hold off raising interest rates until September at the earliest helped push the S&P 500 to a record high close on Thursday and drove the dollar to near its lowest level since January.

Gold hit a three-month high as the dollar came under pressure.

U.S. data showed recent dollar strength and lower oil prices suppressed producer price inflation in April, supporting the view the Fed will probably not raise rates until later this year.

“People are pretty focused on the weak numbers for the U.S.,” said David Gilmore, partner at Foreign Exchange Analytics in Essex, Connecticut. “People are increasingly wondering if the Fed is going to be ready to begin raising rates in September.”

With a rise in U.S. interest rates seeming more distant, some investors sold long dollar positions.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, remained near a low of 93.133 hit earlier in the session. That level was the lowest since Jan. 22, when the European Central Bank announced a program of quantitative easing.

Wall Street gained as the dollar slipped, offering respite to U.S. multinationals.

A separate report showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week.

“We need to see clarity that the underlying growth trend in the U.S. economy is actually firmer than the Q1 number would suggest” in order for the dollar to resume its strengthening trend, said Jose Wynne, global head of FX research at Barclays in New York.

The Dow Jones industrial average rose 191.75 points, or 1.06 percent, to 18,252.24, the S&P 500 gained 22.62 points, or 1.08 percent, to 2,121.1 and the Nasdaq Composite added 69.10 points, or 1.39 percent, to 5,050.80.

MSCI’s all-country world index of stock market performance in 46 countries was up 0.8 percent.

U.S. Treasuries ended stronger, even after the Treasury had to pay more to sell new 30-year bonds, as an overhang of government and corporate debt supply passed.

The government’s $16 billion sale of 30-year bonds saw lackluster demand, resulting in a yield of 3.044 percent, the highest since November and around two basis points above where traders had expected it to price.

Benchmark 10-year note yields fell to 2.26 percent from 2.27 percent late on Wednesday.

GOLD GAINS, OIL FALLS

Investors also were keeping a close eye on developments in Greece, which on Thursday offered a concession to international lenders by pushing ahead with the sale of its biggest port.

In commodity markets, spot gold rose to the highest since Feb. 17 at $1,227.04 an ounce before paring some of those gains.

Oil futures pulled back, weighed down by concerns about ample global supply.

Expiring front-month Brent June crude fell 22 cents to settle at $66.59 a barrel. July Brent fell 57 cents to settle at $66.70.

U.S. June crude fell 62 cents to settle at $59.88.

(Additional reporting by Sam Forgione, Karen Brettell and Robert Gibbons in New York, Tanya Agrawal in Bengaluru and Jamie McGeever in London; Editing by Bernadette Baum, Nick Zieminski and Meredith Mazzilli)

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