Dollar plunges in broad selloff, stocks rebound
NEW YORK (Reuters) - Global equities moved higher while the dollar slid against the euro and yen on Thursday as investors reduced heavy bets on the greenback on concerns that Friday's U.S. jobs report will disappoint.
Wall Street rebounded from an earlier swoon that saw U.S. equities slip in tandem with the dramatic moves in currency markets. The S&P 500 .SPX fell through its 50-day moving average, but shares rebounded as buyers returned.
"You get this rally that is more technical than anything else, because there's no dramatic economic news or anything said out of Europe or anywhere else today," said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.
"But I think over the next couple of weeks the market is going to test (going below the 50-day moving average) again and move a little bit lower," Polcari said.
Fear of a weaker-than-expected jobs report prompted investors to unwind bets that had been profitable for months. In particular, long positions - bets that the U.S. currency will rise - against the yen and Japanese stock futures were reversed.
Nikkei futures were down 1.8 percent. At one point, they slumped more than 3 percent in electronic trade after another decline overnight in Japan during regular trading.
Gold suddenly turned higher, rising 1 percent, at midday in New York as investors sold long positions on the greenback.
U.S. Comex gold futures for August delivery settled up $17.30 at $1,415.80 an ounce.
Sentiment shifted toward worry that the monthly U.S. nonfarm payrolls report on Friday will be weaker than expected after several lackluster economic data points this week.
Economists polled by Reuters expect 170,000 jobs to have been added to the U.S. economy in May. The unemployment rate is seen holding at an almost 4-1/2-year low of 7.5 percent.
The market's bias remains "to the downside given all the nervousness ahead of the report tomorrow," said Leo Grohowski, chief investment officer at BNY Mellon Wealth Management in New York.
Optimism has dimmed in recent days, and with that came an unwinding of trades that have produced big gains in recent months ahead of the jobs figures. The dollar fell to a three-and-a-half-month low against the euro as the single currency spiked to $1.3304 at one point.
The euro was up 1.16 percent at $1.3245.
Versus the yen, the dollar was getting crushed, earlier falling more than 3 percent to 95.98 yen, a six-week low. The dollar later traded at 97.09, off 1.99 percent.
Coming into this week, speculators in the yen had a net short position of more than 99,000 contracts, the biggest such short position this year, according to U.S. Commodity Futures Trading Commission data.
Fears about reduced stimulus from the U.S. Federal Reserve, along with worries about the effectiveness of Japan's radical economic stimulus, have rocked global equity markets, leaving MSCI's world equity index near six-week lows.
The Dow Jones industrial average .DJI closed up 80.03 points, or 0.53 percent, at 15,040.62. The Standard & Poor's 500 Index .SPX ended up 13.66 points, or 0.85 percent, at 1,622.56. The Nasdaq Composite Index .IXIC was up 22.58 points, or 0.66 percent, at 3,424.05.
The declines caused investors to shift to safe-haven government debt. The U.S. benchmark 10-year note rose 5/32 to drop its yield to 2.0733 percent, after briefly touching 2 percent.
The euro was stronger earlier after the European Central Bank left interest rates unchanged and ECB President Mario Draghi said further monetary support was unlikely in the near future.
The ECB, as widely expected, kept its interest rate at a record low 0.5 percent, deciding to wait for signs of the economic turnaround it has predicted for the region in the second half of the year.
Draghi, at a news conference afterwards, said the ECB was technically ready for negative deposit rates - the rate it pays commercial banks to hold their money - but there was no reason to act right now.
The MSCI world equity index .MIWD00000PUS trimmed losses to rise 0.44 percent on the day. The FTSEurofirst 300 .FTEU3 of leading European shares closed down 1.2 percent at 1,178.59.
Earlier, the Bank of England also chose to leave its loose monetary policy unchanged at the conclusion of the final policy meeting under current Governor Mervyn King, after recent data pointed to a tentative pick-up in activity.
Another volatile session for Japan's Nikkei stock index .N225 on Thursday, which ended below 13,000 for the first time in two months, undermined Asian market sentiment, sending shares to fresh 2013 lows.
In commodity markets, oil prices gained after a report on a big drop in U.S. oil stocks. Brent crude settled up 57 cents at $103.61 a barrel. U.S. oil settled $1.02 higher at $94.76 a barrel.