NEW YORK (REUTERS) - US stocks touched record highs in choppy trade on Monday (July 26) and the dollar weakened, as investors avoided making new, bold bets before this week's Federal Reserve policy meeting, which might offer clues on the outlook for monetary policy.
The performance in US shares contrasted with sharp losses in Asia overnight, when MSCI's broadest index of Asia-Pacific shares outside Japan fell 2.1 per cent to its lowest since December, hurt by concerns over tighter regulations in China.
In the United States, investors will closely parse comments by Federal Reserve Chair Jerome Powell on Wednesday after a two-day policy meeting for clues on how the central bank will start tapering its asset purchases, its assessment of inflation risks, and the future of interest rates.
"Powell will likely highlight that the recovery is on track but Covid-19 remains a key downside risk," analysts at Bank of America said in a research note, adding that details about the Fed's tapering of asset purchases would probably be revealed in future meetings.
After vacillating between modest gains and losses for most of the day, US stock indexes managed to nudge higher to eke out record closes.
The Dow Jones Industrial Average added 83 points, or 0.24 per cent, to finish at an all-time high of 35,144.31, while the S&P 500 rose 10.5 points, or 0.24 per cent, to end at 4,422.3, also a record close. The Nasdaq Composite was little changed, adding just 3.7 points, or 0.03 per cent, to close at 14,840.71.
In a sign that risk appetite remained firm on Wall Street, Bitcoin, the world's biggest cryptocurrency and sometimes an indicator of the demand for risk, soared 8.6 per cent to US$38,557.16, while Ethereum jumped 5.1 per cent to US$2,304.66.
Speculation that online retailing giant Amazon.com might accept Bitcoin as payment sparked the latest rally, and short sellers covering their positions added to the surge.
On the other hand, the US dollar, which usually benefits when investors are seeking safety, softened as investors turned their attention to the Fed meeting.
The dollar index fell 0.301 per cent to 92.612, but not far from a 3-1/2-month high of 93.194 struck last week. A softer dollar bolstered the euro, which gained 0.31 per cent to US$1.1855.
The dollar has gained nearly 4 per cent from a low on May 25 as an improving US economy bolstered the outlook for the Fed to start paring asset purchases as early as this year.
Indeed, investors have been pulling money out of Asian and emerging market stocks and putting them into US shares instead, attracted by forecast-beating earnings and a recovery in the US economy.
Bond markets have remained remarkably untroubled by the prospect of eventual tapering. Yields on US 10-year notes have fallen for four weeks in a row - they slipped to a low of 1.221 per cent on Monday before rebounding to 1.2946 per cent.
But the drop in Treasury yields has done little to undermine the dollar, in part because European yields have fallen even further amid expectations of continued massive bond buying by the European Central Bank.
Gold prices also weakened as investors turned cautious ahead of the Fed policy meeting. Spot gold dropped 0.2 per cent to US$1,797.64 an ounce. US gold futures fell 0.23 per cent to US$1,797.20 an ounce.
Oil prices reversed earlier losses, buoyed by views that a tight supply for the rest of the year will support prices.
US crude recently fell 0.01 per cent to US$72.06 per barrel while Brent was at US$74.50, up 0.54 per cent on the day.