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(Bloomberg) — The dollar maintained its rally, trading near a 12-year high versus the euro as investors considered the timeline for higher U.S. interest rates ahead of this week’s Federal Reserve meeting. Crude oil extended its slump. The greenback was at $1.0498 per euro by 8:16 a.m. in Tokyo, after reaching its strongest level since January 2003. The dollar held weekly gains of at least 0.4 percent versus the currencies of Australia and New Zealand. Standard & Poor’s 500 Index futures slipped 0.1 percent following a 0.6 percent drop in the U.S. gauge Friday, while Australian shares retreated and Japanese futures were mixed. Oil slid more than 1.7 percent in the U.S. and London amid concern over the deepening glut. The Bloomberg Dollar Spot Index is at a decade high as the prospect of a U.S. rate rise bolsters the appeal of the greenback relative to its global counterparts. Central bankers from Europe to Asia are easing policy to stoke expansion, with China’s Premier Li Keqiang promising in a televised address at the weekend to intervene if growth in the world’s No. 2 economy lags too much. Indonesia posts trade data Monday and India reports wholesale prices, before the Fed meets March 17-18. “This has never happened before,” Evan Lucas, a markets strategist in Melbourne at IG Ltd., wrote in a client note e- mailed today. “The Fed has never found itself on the other side of global policy and this central bank divergence is making the dollar the most sought-after currency on the planet.”

BHP Retreat

The Bloomberg dollar gauge, which tracks the greenback against 10 major peers, was little changed Monday after climbing 0.8 percent on Friday to its highest level in data going back to the end of 2004. The Aussie dollar weakened 0.2 percent to 76.23 U.S. cents. Minutes of the Reserve Bank of Australia’s March 3 meeting, when the key rate was held at 2.25 percent after a cut in February, are due Tuesday. Traders wager there’s a 50 percent change the RBA will reduce borrowing costs again within six months, according to data compiled by Bloomberg from swap contracts. Eight of 10 industry groups on the S&P/ASX 200 Index declined in Sydney, with the stock gauge losing 0.7 percent, while New Zealand’s NZX 50 Index rose 0.3 percent.
BHP Billiton Ltd., the world’s biggest mining company and Australia’s largest oil producer, declined for a 10th straight session, losing 2.4 percent to be headed for its lowest close since Jan. 29. Prices for iron ore, Australia’s biggest export, fell for the eighth time in nine days at China’s Qingdao port on Friday, slipping to a near record low.

Oil Selloff

West Texas Intermediate crude lost 2.1 percent to $43.88 a barrel after sinking 4.7 percent on Friday, and capping a weekly plunge of 9.6 percent, its steepest drop this year. Brent oil fell 1.8 percent to $53.70 per barrel following Friday’s 4.2 percent retreat. A record surplus in U.S. crude inventories may soon strain the country’s storage capacity, renewing the slump in oil prices, the International Energy Agency said Friday. The largest oil-storage hub in the U.S., located in Cushing, Oklahoma, is 70 percent full, the agency said. “We’ve got this ongoing increase in inventory with no cut in production, despite the drop in the number of shale oil rigs,” Ric Spooner, chief markets strategist at CMC Markets in Sydney, said by phone Monday. “We are seeing downside momentum now develop in the market.”

No Bottom

Former Fed Chairman Alan Greenspan said oil prices are yet to bottom as U.S. supplies will continue to expand. “Essentially we are bottling up a huge amount of crude oil in the United States,” Greenspan said in an interview with Bloomberg TV on Friday. “Until we find a way to get out of this dilemma, prices will continue to ease because there’s no place for that oil to go except into the markets.” Futures on Japan’s Nikkei 225 Stock Average were bid at 19,210 in the Osaka pre-market, from 19,200 at their close in Japan on Friday. Contracts traded on the Chicago Mercantile Exchange were little changed at 19,210 in early Monday trade. The yen was steady at 121.34 per dollar following last week’s 0.5 percent drop, its fourth straight weekly decline.
Contracts on the Hang Seng and Hang Seng China Enterprises gauges in Hong Kong dropped 0.4 percent and 0.6 percent respectively in most recent trading, while Singapore-traded futures on the FTSE China A50 Index were down 0.2 percent on Friday. Kospi index futures in Seoul fell 0.4 percent.

–With assistance from Ben Sharples in Melbourne.

To contact the reporter on this story: Emma O’Brien in Wellington at eobrien6@bloomberg.net To contact the editors responsible for this story: Emma O’Brien at eobrien6@bloomberg.net John McCluskey