Dollar rises on Fed talk, energy weighs on stocks

Global equity markets fell and the dollar advanced on Wednesday as investors attempted to gauge the path of interest rates by the US Federal Reserve after a series of hawkish comments by Fed officials this week.

The dollar was up 0.48 per cent to 96.104 against a basket of major currencies as it moved towards its first weekly gain in four.

Last week, the Fed cut in half the number of rate hikes it predicts for the rest of this year to two, weakening expectations for a move in either April or June.

But, in the past two days, several officials have expressed views for more hikes regardless of the volatility that has been the hallmark of financial markets this year.

"The focus has been on all these Fed guys coming out, really in defiance of (Fed Chair) Janet Yellen," said Ken Polcari, Director of the NYSE floor division at O'Neil Securities in New York.

"The dollar is reacting because, if these guys are calling for a rate hike in April, then the dollar is going to move higher. If the dollar is going to move higher it is going to put pressure on everything else."

Philadelphia Fed President Patrick Harker, who said on Tuesday the Fed should consider another rate hike as early as next month, is scheduled to speak again at 1730 EDT (2130 GMT). St Louis Fed President James Bullard, a voter on US monetary policy this year, said on Bloomberg TV on Wednesday he would like to see further stabilization in inflation expectations.

The stronger dollar helped dampen demand for oil while a preliminary report from an industry group showed a higher-than-expected stock build rekindled worries of a glut.

The weakness in energy names also pushed helped push stocks lower in the US and Europe. The STOXX Europe 600 oil and gas index and the S&P energy index were both off 1.2 per cent, with the latter the worst performing of the 10 major S&P sectors.

The FTSEuroFirst 300 index of leading shares was down 0.18 per cent at 1,335.76. MSCI's index of world shares lost 0.57 per cent.

The Dow Jones industrial average fell 26.26 points, or 0.15 per cent, to 17,556.31, the S&P 500 lost 5.32 points, or 0.26 per cent, to 2,044.48 and the Nasdaq Composite dropped 31.22 points, or 0.65 per cent, to 4,790.44.

Gold also weakened in the face of the stronger dollar, down 2.4 per cent to $1,217.90 after hitting a low of $1,215.10, its lowest level since February 26.

Britain's pound slumped 0.56 per cent to $1.4126, with rising concerns that the attacks in Brussels would bolster the campaign for a vote to leave the European Union in June's "Brexit" referendum.

It was back on the defensive against the dollar on Wednesday. Derivatives allowing investors to insure themselves against sharp moves in sterling exchange rates ahead of that vote reached their highest since 2010 elections. Benchmark US 10-year notes were last up 4/32 in price to yield 1.921 per cent, down from 1.94 per cent on Tuesday.