(Updates prices, adds more comment)
* Risk of hawkish Fed lifts dollar, Treasury yields
* Sterling steadier but still worried by Scots independence
* Commodities, carry-linked currencies among the losers
* European shares just up, Tokyo shares highest since 2008
By Patrick Graham
LONDON, Sept 12 The U.S. dollar headed for its
ninth straight week of gains on Friday, some measure of how the
economic fortunes of the United States and its major economic
peers are diverging after six years of financial turmoil.
A broad rise for the greenback was the main bet of most
major investment houses this year but it has taken a very long
run of relatively good U.S. numbers and a surge in concern over
European and Japanese growth for the currency to deliver.
Investors are convinced a Federal Reserve meeting next
Wednesday will rubber-stamp a shift towards higher interest
rates in 2015, as suggested by research from the U.S. central
bank this week.
That drove benchmark 10-year U.S. Treasury yields to their
highest in over a month on Friday, while European
stocks shrugged off weakness in Asia to inch higher.
A 2 percent rise on the week took the U.S. currency to a
six-year high of 107.39 yen. Against the euro it gained
0.2 percent on the week and was broadly flat on the day at
"We do seem to have reached a tipping point both on
expectations for interest rate rises next year and the dollar,"
said Simon Derrick, head of currency research at Bank of New
York Mellon in London.
"The rally finally seems to be getting the attention it
The dollar index, a measure of the greenback's value against
a basket of six major currencies, remained on course for its
longest streak of weekly gains since the first quarter of 1997.
A range of political shocks to the system, from turmoil in
the Middle East to fighting in Ukraine and a referendum on
Scottish independence, have added to support for the greenback
against emerging and developed world currencies.
But the euro, hammered by worsening economic numbers and a
further easing of monetary policy by the European Central Bank
in the past month, has begun to find some support in the last
Sterling wobbled ahead of the latest poll to show next
week's vote on whether Scotland will break its 300-year old
political union with England as too close to call.
In general, nerves on currency and equity markets have eased
a little on the back of surveys showing the "No" camp edging
back in front.
Britain's top equity index rose for the first time in six
sessions, driven by Scottish-based shares such as Royal
Bank of Scotland, soft-drink group AG Barr and
"There's a lot of hesitation at this point," Saxo Bank sales
trader Andrea Tueni said.
"People are reluctant to take any new positions ahead of the
Scotland referendum, but also ahead of the Fed's meeting next
week, which could turn out to be a real game-changer."
The rise in volatility on currency markets -- at a four-year
high on sterling on Friday -- has prompted some investors to
pare back on carry trades, where they borrow at low rates in
euros and yen to buy higher-yielding assets such as
commodity-linked or emerging market currencies.
Victims included the Canadian dollar, which plumbed a
five-month low of C$1.1030, while Australia's dollar
hit a six-month low of $0.9053.
The dollar gains have also pushed oil prices to their lowest
in two years, while gold sank to an eight-month trough
and copper fell to a three-month low.
In contrast, the dollar's gains on the yen were considered
positive for Japanese exports, corporate earnings and equities.
The broad Topix index added 0.2 percent and reached its
highest level since July 2008.
Stocks elsewhere in Asia fared less well as investors
fretted that even the hint of a shift in Fed policy might spark
a withdrawal of funds from emerging markets. MSCI's broadest
index of Asia-Pacific shares outside Japan was
down 0.3 percent at one-month lows.
A strong result from U.S. retail sales at 1230 GMT would
only add to speculation the Fed might refine, or even drop, its
commitment to keeping rates low for a "considerable time" after
its asset purchase programme ends. That has put yields on
two-year Treasuries on track for their highest weekly
close since April, 2011.
"The market will be on the defensive going into next
Wednesday's Fed meeting due to the growing contingent who are
convinced a hawkish language change is imminent," said William
O'Donnell, head of Treasury strategy at RBS.
"But bearish expectations may surpass what the Fed will
deliver," he added. "We think September is a bit premature for a
language change and that the Fed is just looking to have the
(Editing by Catherine Evans)