By Rodrigo Campos
NEW YORK (Reuters) - The U.S. dollar hit its highest since 2003 against a basket of currencies on Tuesday as the prospect of the first rise in U.S. interest rates in almost a decade stoked global volatility, hitting stocks, crude and copper.
U.S. crude futures fell below $50 per barrel and Brent dropped more than 2 percent to near $57, while copper lost almost 2 percent weighed also by a continuing slide in China's producer prices.
Concerns over Greece added to the bearish mood and drove the S&P 500 to a one-month low in early trading on Wall Street. Technical negotiations intended to prevent Greece going bankrupt and potentially being forced to abandon the euro bloc will start in Brussels on Wednesday.
The sharp decline in stocks responds to "continuing concern over interest rates. It is a continuation of the pullback we saw last Friday" after the jobs report, said Katrina Lamb, head of investment strategy and research wealth management firm MV Financial in Bethesda, Maryland.
She said the prospect of sustained dollar strength is also taking a toll on the outlook for U.S. corporate earnings.
White House Council of Economic Advisers Chairman Jason Furman said the surging greenback is a headwind for U.S. growth, Bloomberg reported.
The Dow Jones industrial average <.DJI> fell 219.18 points, or 1.22 percent, to 17,776.54, the S&P 500 <.SPX> lost 22.35 points, or 1.07 percent, to 2,057.08 and the Nasdaq Composite <.IXIC> dropped 63.59 points, or 1.29 percent, to 4,878.85.
The FTSEurofirst 300 <.FTEU3> index of top European shares was down 0.5 percent and Nikkei futures
European stocks fell sharply despite the European Central Bank's new bond-buying campaign continuing to push down the euro and the bloc's already record-low borrowing costs.
The ECB's program was helping push the U.S. dollar higher, as was speculation the Federal Reserve will start lifting interest rates from mid-year after more stellar jobs data last Friday and a chorus of hawkish Fed policymaker comments.
The euro was last down 0.9 percent at $1.075 after hitting as low as $1.0722.
"It is all about the Fed now," said Aurelija Augulyte, senior foreign exchange strategist at Nordea in Helsinki. "The ECB (bond buying) bias has now been fully digested, but what the market is now trying to do is price in (the prospect of) earlier Fed rate hikes."
The prospect of rising U.S. yields threatened to draw funds away from emerging markets, causing strains from Brazil to Turkey. The Mexican peso hit a record low of 15.6218 against the dollar while the Brazilian real fell against the greenback for the 13th time in the past 15 sessions.
OIL SLIPS
A further drop in producer prices in China overshadowed data that showed consumer prices there rose 1.4 percent in February compared with the same month last year. Much of the increase, however, was due to seasonal volatility in food prices.
Most commodities continued to struggle with the strength of the U.S. dollar. Gold bounced slightly after hitting a three-month low around $1,155 an ounce while copper futures
Brent crude
Benchmark 10-year U.S. Treasury notes were last up 18/32 in price to yield 2.1315 percent, compared with 2.195 percent late Monday.
(Additional reporting by Jemima Kelly in London and Barani Krishnan in New York)
