Global Markets: Dollar slumps versus yen; Wall Street rises on data

NEW YORK - The U.S. dollar fell to a 10-week low against the yen on Thursday, extending a selloff on worries about an end to central bank stimulus, while Wall Street stocks moved higher on stronger-than-expected U.S. Economic data. Japan's Nikkei fell 6.4 percent overnight, its second-biggest daily drop in more than two years. European markets lost more than 1 percent before recovering to end slightly lower. Concern about a pullback of central bank support mounted after recent comments from Federal Reserve Chairman Ben Bernanke on the Fed's stimulus program and a decision by the Bank of Japan earlier this week to hold off on easing further. The concerns have fueled a selloff in global equities, emerging markets, risky bonds and commodities, all of which have been buoyed by central bank liquidity, while driving the safe-haven yen sharply higher. "This week's BOJ meeting, which offered no new policy initiatives or stimulus programs, was the catalyst for the rapid change in sentiment in the foreign exchange market," said Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management in New York. The dollar lost 1.3 percent to 94.77 yen as weakness in equities and emerging markets prompted investors to buy back the low-yielding Japanese currency, which is a favorite funding currency in these trades. The dollar fell as low as 93.78 yen, its lowest since April 4, giving back almost all the gains made since the Bank of Japan's aggressive monetary easing was announced on that day. Losses in Japanese stocks also prompted foreign investors to unwind hedges they took out to protect themselves from the yen's recent slide. That also contributed to the currency's gain. U.S. stocks got a lift after data showed retail sales rose more than expected in May and first-time applications for jobless benefits fell last week, suggesting resilience in the U.S. economy. The Dow Jones industrial average gained 113.46 points, or 0.76 percent, at 15,108.69. The Standard & Poor's 500 Index was up 14.10 points, or 0.87 percent, at 1,626.62. The Nasdaq Composite Index was up 27.92 points, or 0.82 percent, at 3,428.35. "The bright spot for the entire week was the data point today on U.S. retail sales. That data supports the notion that the U.S. consumer is moving forward with spending despite the uncertainty of Fed tapering," said Anastasia Amoroso, global market strategist at J.P. Morgan Funds in New York. The Federal Reserve meets next Tuesday and Wednesday. Some analysts said if the Fed does not hint at an imminent exit from its quantitative easing next week, the market could see a relief rally. The MSCI All-Country World Index was flat at 361.65 follow two days of losses that moved it further away from a five-year peak set last month. European shares closed 0.07 percent lower as bargain-hunters picked up hammered mining and banking stocks. An index of emerging market equities hit 11-month lows and was last down nearly 1 percent. Most emerging currencies remained under heavy pressure, with the Indian rupee falling to a record low.             The euro lost 1.3 percent 126.38 yen, while against the dollar, it traded little changed at $1.3338. Brent crude rose 58 cents to $104.07 a barrel, having traded as low as $102.75 on reports indicating weak demand, including a cut in the outlook for global economic growth by the World Bank. U.S. crude rose 30 cents to $96.18 a barrel. Spot gold fell 0.7 percent to $1,378 an ounce. Investors headed for traditional safe-haven government debt. The benchmark 10-year U.S. Treasury note was up 14/32, the yield at 2.1776 percent. German government bonds  had their biggest gains in a week. The recent selling of euro zone periphery debt also resumed, and Italy's borrowing costs rose at an auction of three-year debt, although yields at a parallel 15-year sale were little changed. — Reuters