(Bloomberg) -- The dollar rose to its strongest level in 11 weeks and U.S. bonds declined as investors boosted wagers that the Federal Reserve will raise interest rates this year. South Africa’s rand tumbled after a report that the nation’s finance minister will be charged with fraud.
The greenback jumped against all of its 16 major counterparts as Fed Bank of Chicago President Charles Evans said policy “may well be changing soon,” even as he argued for keeping interest rates low until core inflation moves higher. Treasury two-year note yields jumped to the highest in more than four months. The rand tumbled the most since June after Finance Minister Pravin Gordhan was summoned to appear in court. Samsung Electronics Co. led Asian stocks lower after the company told retail partners to stop sales and exchanges of its Galaxy Note 7 smartphone. U.S. crude oil retreated from its highest price in 15 months.
The dollar has been supported by increasing speculation that the U.S. economy is proving to be strong enough to withstand higher borrowing costs even after last week’s jobs report came in below economists’ predictions. Markets will get more clues on policy makers’ thinking on Wednesday with the release of the minutes of the Federal Open Market Committee’s Sept. 20-21 meeting. A government report Friday will show retail sales rebounded in September, according to a Bloomberg survey of economists. Investors will also get a chance to assess the health of U.S. companies, with Alcoa Inc. unofficially kicking off the U.S. reporting season on Tuesday.
U.S. dollar gains are “entirely linked to the fact that the market has been upwardly rerating expectations of a December rate hike,” said Sue Trinh, head of Asia foreign-exchange strategy for Royal Bank of Canada in Hong Kong. “Three weeks ago, the implied probability of a December hike discounted by fed funds futures was under 50 percent, today it is close to 70 percent.”
The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, rose 0.3 percent as of 10:27 a.m. London time, set for its highest closing level since July 26. The index has gained in six of the past seven trading days as wagers on higher rates become more entrenched.
The greenback advanced for a second day versus the euro, appreciating 0.2 percent to $1.1113, and was 0.4 percent firmer at 103.95 yen.
The rand dropped more than 3 percent and was at 14.2176 per dollar, as Gordhan confirmed police had delivered a summons to his home. Eye Witness News reported earlier that the minister would be charged with fraud relating to his time as head of the nation’s tax authority.
The pound fell for a fourth day, with the its precipitous slide prompting strategists from ING Groep NV, JPMorgan & Chase Co. and Julius Baer Group Ltd. to revise down their longer-term predictions. Sterling has been hurt as investors await clarity from Prime Minister Theresa May’s government on how the nation will manage its exit from the European Union. The pound dropped 0.5 percent to $1.2298.
Sweden’s krona slumped as a report showed the nation’s annual inflation rate unexpectedly dropped in September, pushing the currency down 0.6 percent to 9.7005 per euro, the weakest level since December 2014. It fell 0.8 percent to 8.7259 per dollar.
China’s yuan fell 0.04 percent offshore, taking its eight-day loss to 0.7 percent. The currency joined the International Monetary Fund’s reserves basket on Oct. 1. Onshore, the yuan fell to a six-year low.
The Stoxx Europe 600 Index slipped less than 0.1 percent in London. Gains in luxury-goods companies tempered declines; LVMH Moet Hennessy Louis Vuitton SE rose 4.9 percent after reporting sales that topped analysts’ estimates. Christian Dior SE and Burberry Group Plc advanced at least 1.8 percent.
Banks and health-care shares led declines among Stoxx 600 groups. Deutsche Bank AG dropped 0.8 percent, for the worst performance on Germany’s benchmark DAX Index.
S&P 500 Index futures declined 0.2 percent, after U.S. equities closed up 0.5 percent on Monday as surging oil boosted energy producers. As Alcoa reports, investors will turn their attention to earnings for indications of the health of corporate America. Analysts forecast a 1.6 percent contraction in three-month profit for S&P 500 members, which would be a sixth straight quarterly drop.
Yields on Treasury notes due in two years increased three basis points to 0.86 percent, after reaching the highest since June. 2. Ten-year note yields rose six basis points to 1.77 percent. Trading resumed after the Columbus Day bond-market holiday on Monday.
The decline in Treasuries is also being driven by the willingness of Saudi Arabia and Russia to cooperate on an oil output deal, said John Gorman, head of non-yen rates trading for Asia and the Pacific at Nomura Holdings Inc. in Tokyo. Higher oil prices tend to boost inflation, which erodes the value of the fixed payments on bonds.
European government bonds were little changed, with the yield on benchmark German 10-year bunds at 0.05 percent. The yield on similar-dated U.K. gilts fell three basis points to 0.99 percent.
Asian government debt dropped, with yields on 10-year Australian bonds up six basis points to 2.25 percent. Yields on similar maturity notes in Japan climbed by 1.5 basis points and those in South Korea jumped seven basis points.
West Texas Intermediate crude slipped 0.5 percent to $51.09 a barrel after jumping 3.1 percent last session to its highest closing price since July 2015. Brent fell 0.9 percent to $52.67 per barrel.
Oil has gained almost 15 percent since the Organization of Petroleum Exporting Countries provisionally agreed last month to cut production for the first time in eight years. The group’s members meet this week in Istanbul for talks on implementing the deal and Saudi Arabian Energy Minister Khalid Al-Falih said it’s not unthinkable prices will rise to $60 a barrel by the end of this year.
Zinc led industrial metals lower, falling 1.8 percent to $2,287 per metric ton. Tin slid 0.5 percent.
(The day of the U.S. retail sales data was corrected in paragraph three.)
--With assistance from Hideki Sagiike Yuko Takeo Kevin Buckland Alan Soughley and Stephen Kirkland To contact the reporters on this story: Emma O'Brien in Wellington at email@example.com, Lukanyo Mnyanda in Edinburgh at firstname.lastname@example.org. To contact the editors responsible for this story: Paul Dobson at email@example.com, Sarah McDonald
©2016 Bloomberg L.P.