New York - The dollar soared on Friday against a basket of currencies, reaching a nearly three-year peak, and global equity indexes gained as speculation mounted over whether the Federal Reserve would soon begin to rein in its asset-buying program.
Wall Street advanced, with the benchmark S&P 500 rebounding from its worst decline in nearly three weeks.
European equity indexes climbed in sync with a rally in carmakers' shares, which were bolstered by signs of a revival in domestic sales.
US stocks also got a lift from a survey showing a rebound in US consumer sentiment in early May to the highest level in nearly six years as Americans felt better about their financial and economic prospects, particularly among upper income households.
The dollar's strength was largely attributed to the euro, which fell to a six-week low on market talk that the European Central Bank could introduce negative deposit rates, a move that would make banks pay to park their cash overnight with the ECB.
The dollar index, which measures its value against a basket of six major currencies, rose to 84.371, its highest in nearly three years.
Around midday in New York, the dollar index was up 0.8 percent at 84.255.
The euro fell 0.4 percent to $1.2830, while the dollar hit a 4-1/2 year high versus the Japanese yen, up 0.66 percent at 102.91.
“People are positive about the US economic recovery despite recent weak data and today's theme is mostly about the broadly strong dollar,” said Charles St-Arnaud, FX strategist at Nomura Securities.
“Meanwhile, data in the euro zone shows they remain in a recession and raised expectations the ECB will take further action is weighing on the euro,” he said.
A measure of global equity activity, MSCI's all-country world stock index, dipped 0.02 percent, pulled lower by emerging markets.
The Dow Jones industrial average was up 62.48 points, or 0.41 percent, at 15,295.70.
The Standard & Poor's 500 Index was up 8.02 points, or 0.49 percent, at 1,658.49.
The Nasdaq Composite Index was up 15.85 points, or 0.46 percent, at 3,481.10.
Among other indexes, the Russell 2000 index was up 6.96 points, or 0.71 percent, at 992.30.
The FTSEurofirst-300 index of European shares bounced off session lows to rise 0.11 percent to provisionally close at 1,246.79.
In London, the FTSE-100 index gained 0.53 percent to 6,723.06.
Gold fell for a seventh straight session, its longest losing streak in four years, driven by speculation that the Fed may soon ease its asset-purchase program to boost the economy.
Spot gold prices lost $23.69 to $1,362 an ounce.
US stocks and gold prices fell on Thursday, while the dollar rose following comments from John Williams, president of the Federal Reserve Bank of San Francisco, that the Fed could begin easing up on stimulus this summer.
Prices for US Treasuries added to losses after the Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment rose to 83.7 in early May from 76.4 last month, topping economists' expectations for 78.
The May reading was the highest level since July 2007.
The benchmark 10-year US Treasury note fell 15/32 in price to yield 1.9297 percent.
In Europe, German Bunds hit one-week highs, with traders citing talk that the ECB was checking with some banks on whether they were ready for a potential cut in its deposit rate to below zero.
German Bund futures rose as much as 43 ticks on the day to 145.74, before paring gains to trade 14 ticks higher.
Oil pared gains on concern about the strength of global demand.
Brent crude rose 13 cents to $103.91 a barrel. US crude futures rose 24 cents, or 0.25 percent, to $95.40 a barrel. - Reuters