Dollar hits eight-month high on rate views, metals fall

Mon Nov 23, 2015 7:02pm EST
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By Caroline Valetkevitch

NEW YORK (Reuters) - The dollar rose to an eight-month high on Monday amid heightened expectations that the U.S. Federal Reserve might raise interest rates next month, driving down the prices of copper, gold and other metals.

World equity markets slipped, with U.S. stocks ending slightly lower in quiet trading after strong gains last week.

Worries that a buoyant dollar could discourage producers from cutting supply despite weak demand weighed on base metals prices. Copper fell to its cheapest in six months before recovering.

The dollar index .DXY, which measures the greenback against six major currencies, rose as much as 0.4 percent, touching 100.000, an eight-month high not far from this year's peak of 100.390.

San Francisco Fed President John Williams on Saturday cited a "strong case" for raising rates when Fed policymakers meet next month, as long as U.S. economic data does not disappoint. His comments overshadowed Monday's lackluster U.S. manufacturing and housing reports.

"For him to acknowledge that there's a strong case for higher rates next month is a strong signal to the market that there's increasing consensus at the Fed that rates are likely to rise next month," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

A big healthcare deal failed to impress U.S. stock investors. Pfizer's (PFE.N: Quote) announcement of what is expected to be the biggest-ever healthcare deal pushed its shares down 2.6 percent, making it one of the biggest drags on the S&P. Target company Allergan (AGN.N: Quote) closed 3.4 percent lower after the $160 billion deal announcement.

The Dow Jones industrial average .DJI fell 31.13 points, or 0.17 percent, to 17,792.68, the S&P 500 .SPX lost 2.58 points, or 0.12 percent, to 2,086.59 and the Nasdaq Composite .IXIC dropped 2.44 points, or 0.05 percent, to 5,102.48.   Continued...

Traders work on the floor of the New York Stock Exchange November 11, 2015. REUTERS/Brendan McDermid