Dollar reaches weakest level in three years

On Friday the dollar hit the weakest level in three years and Treasury yields stabilized after a recent selloff as investors weighed the prospect of a U.S. government shutdown and signs of inflation picking up. Stocks in Europe and Asia advanced and gold jumped.

The moves dominated global markets, with the euro, yen, gold and base metals among the beneficiaries of dollar weakness. The risk-on mood that helped drive up Treasury yields this week was still in evidence, with European stocks following Asian peers higher. U.S. futures pointed to a positive open, boosted by the possibility regulations could be eased for big banks. Emerging-market equities climbed for a sixth day, and West Texas crude extended a retreat.

Optimism about global growth finally seems to be catching up with bond markets, with investors factoring in the prospect of accelerating price increases in the world’s largest economy. Thursday’s sale of U.S. bonds that offer a hedge against faster inflation attracted strong demand. Better-than-expected growth numbers from China this week added to a slew of recent data releases from across the world supporting the positive outlook, days before two of the big central banks rule on rates.

The Stoxx Europe 600 Index jumped 0.4 percent as of 8:19 a.m. New York time, the highest in more than two years. The MSCI World Index of developed countries gained 0.2 percent to the highest on record. The MSCI Asia Pacific Index jumped 0.7 percent to the highest on record with the largest climb in more than two weeks. Japan’s Nikkei 225 Stock Average increased 0.2 percent. The MSCI Emerging Market Index rose 0.4 percent with its sixth consecutive advance. The U.K.’s FTSE 100 Index climbed 0.2 percent, the first advance in a week. Futures on the S&P 500 Index rose 0.1 percent.