By Mary Childs Dec. 4 (Bloomberg) -- The biggest rally in the U.S. dollar since June snuffed out an advance in commodities and equities as an unexpected decrease in the unemployment rate triggered bets that the Federal Reserve will lift borrowing costs. Gold slid the most in a year. The Dollar Index, a gauge of the currency against six major trading partners, jumped as much as 1.3 percent. Odds that the Fed will boost interest rates by its June meeting rose to 55 percent from 43 percent yesterday, according to Fed funds futures trading. The Standard & Poor’s 500 Index erased most of a 1.8 percent rally and oil and copper reversed earlier gains. “Good economic news is a boost for the dollar, because ultimately the Fed raises rates, and by raising rates you are going to push your currency up,” said Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees about $641 billion. Stocks rallied at the start of trading after the Labor Department said the U.S. lost 11,000 jobs last month, the fewest since the recession began and less than one-tenth the 125,000 median estimate in a survey of economists. The unemployment rate dropped to 10 percent. The improving labor market indicates the deepest U.S. recession since the 1930s may have ended, though it is too soon to say precisely what month it stopped, said the head of the group charged with making the call. Employment ‘Trough’ “Today’s report makes it seem that the trough in employment will be around this month,” Robert Hall, who heads the National Bureau of Economic Research’s Business Cycle Dating Committee, said in an interview. “The trough in output was probably some time in the summer. The committee will need to balance the midyear date for output against the end-of-year date for employment.” The dollar has slumped this year, spurring demand for commodities as an inflation hedge and alternative investment, as the Fed kept benchmark U.S. interest rates near zero percent to revive lending following the worst financial crisis since World War II. Before today, the Dollar Index sank 8.2 percent while gold rallied 38 percent. The Reuters/Jefferies CRB Index of 19 raw materials lost 1 percent today, paring its 2009 rally to 19 percent. Gold fell for the first time this week as the rising dollar spurred some investors to sell bullion on the heels of a rally to a record. Gold futures fell as much as 4.9 percent from a record of $1,227.50 an ounce, set yesterday in New York. Gold’s Rally Gold’s rally pushed its 14-day relative strength index, a gauge watched by some investors as an indicator of future direction, to 83.5 yesterday. Some analysts and investors who use technical charts view a reading of more than 70 as a signal that the price may soon drop. Crude oil for January delivery fell 82 cents, or 1.1 percent, to $75.64 a barrel. Prices have fallen 0.5 percent this week and are up 70 percent this year. Canadian stocks fell for a second day as gold producers retreated the most since April. The S&P/TSX Index los 0.9 percent as Barrick Gold Corp. plunged 9.2 percent. Two-year Treasuries fell the most since August, sending yields up as much as 14 basis points to 0.86 percent. To contact the reporter on this story: Mary Childs in New York at mchilds4@bloomberg.net.

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