By Angela Moon
NEW YORK Jan 13 The U.S. dollar dropped to its
lowest level in four weeks against the yen and Treasuries prices
rose on Monday, extending Friday's rally as investors reduced
bullish expectations for economic growth after the weak December
A measure of world stock markets reversed early gains to
trade lower as major U.S. stock indexes fell to session lows,
with the 10 S&P 500 industry groups posting losses in widespread
The dollar hit a six-week trough against the yen, falling to
102.97, its lowest level since Dec. 18.
Dollar/yen was one of the strongest-performing major
currency pairs last year and many hedge funds have been betting
the trend will continue as the Fed cuts back its huge
bond-buying program, even as the Bank of Japan continues to
provide even more stimulus this year.
In U.S. Treasuries trading, the yield on the benchmark
10-year note fell to a three-week low after registering the
largest one-day fall since October on Friday.
Benchmark 10-year notes rose 8/32 in price to
yield 2.8285 percent, down from a high of 2.967 percent on
Friday. Thirty-year bonds rose 13/32 in price to
yield 3.7775 percent, down from Friday's high of 3.891 percent.
The implied yields on Fed funds futures also tumbled
as markets pushed back the timing of the Federal Reserve's first
interest rate hike out toward late-2015 from mid-2015. Investors
were also looking for direction with Japanese financial markets
closed on Monday for a public holiday.
"The market is taking its leads from U.S. Treasury markets,
which are generally weighing on the dollar across the board,"
said Adam Cole, global head of FX strategy at RBC Capital
The lower-than-expected jobs gain is not yet seen as likely
to alter the Fed from its course of reducing bond purchases,
which were cut by $10 billion to $75 billion a month and are
seen as likely to be pared further over coming months.
But speculation over when the Fed is likely to begin raising
interest rates from rock-bottom levels is likely to keep short-
and intermediate-dated debt volatile, with expectations for a
rate hike varying from mid-2015 to 2016.
The president of the Atlanta Federal Reserve Bank, Dennis
Lockhart, cautiously endorsed further cuts to the stimulative
program on Monday, warning that the labor market has not yet
healed and that there are worrisome signs of disinflation in the
He said in a speech "very accommodative" monetary policy
remains appropriate despite his predictions for a pick-up in
economic growth and a gradual rise in inflation this year.
Wall Street kicked off a week full of corporate earnings
reports on a cautious note on growing concerns that stocks may
have become expensive after the benchmark S&P 500 hit its
highest level in nearly seven years. The index surged almost 30
percent in 2013.
"People are sitting on their hands, waiting for major
results to figure out how strong this season may be," said
Douglas DePietro, managing director at Evercore Partners in New
The Dow Jones industrial average was down 122.29
points, or 0.74 percent, at 16,314.76. The Standard & Poor's 500
Index was down 15.98 points, or 0.87 percent, at
1,826.39. The Nasdaq Composite Index was down 40.72
points, or 0.98 percent, at 4,133.94.
Investors will keep an eye on fourth-quarter earnings, with
major U.S. banks, including JPMorgan, Citigroup
and Goldman Sachs, announcing results this week. European
earnings will gather pace in the last week of the month.
According to Thomson Reuters data, fourth-quarter profits
are expected to grow 7.3 percent over the year-ago period.
However, the 9.8 ratio of negative guidance to positive outlooks
is currently the largest on record.
In Europe, banking shares rallied after regulators agreed to
soften new leverage ratios for banks. The STOXX bank index
rose 1.5 percent, extending its gains this year to
almost 6 percent.
MSCI's world equity index was down 0.2
percent while emerging stocks were up 0.7 percent.
The FTSEurofirst 300 index of top European shares
rose 0.3 percent to 1,324.42, while the euro zone's blue-chip
Euro STOXX 50 index was up 0.3 percent at 3,111.94,
both just a few points below five-year highs hit recently.
In commodity markets, Brent oil fell slightly below $107 a
barrel as the market absorbed news of a deal between Western
nations and Iran to curb its nuclear program and the resumption
of production from a key North Sea oilfield.
U.S. oil fell more than $1, then pared some losses, though
it was pressured by poor the U.S. jobs data.
Brent crude for February delivery was off 50 cents
to $106.75 per barrel while U.S. crude fell 93 cents to
$91.79 per barrel.