Dollar surges to six-year high on mid-terms, soft data by Geoffrey Smith @FortuneMagazine November 5, 2014, 6:03 AM EST E-mail Tweet Facebook Google Plus Linkedin Share icons The dollar surged to its highest level in nearly six years in the wake of mid-term elections which saw Republicants take control of the U.S. senate for what will be the final two years of President Barack Obama’s term in office. However, it was weak economic data from around the world, rather than the prospect of gridlock in Washington, that was mainly responsible for the dollar’s gains. A new survey showed business activity in China fell back to its slowest in three months, with the headline index for service sector purchasing managers falling to 52.9 from 53.5 in September, according to research firm Markit and HSBC. Overall, the survey showed employment rising modestly but prices continuing to fall, something that will provide little comfort to financial markets that are acutely sensitive to signs of deflation in other parts of the world. The euro fell to its lowest level against the dollar in over two years after Eurostat reported that retail sales fell by a seasonally-adjusted 1.3% in September. That added to the gloom cast by the European Union’s heavy downward revisions to its outlook for the Eurozone economy Tuesday. By 0630 ET, the euro was trading at just under $1.25, while European stock markets were generally higher on expectations that the European Central Bank may announce more stimulus measures at its monthly council meeting Thursday. The dollar’s revival on the currency markets is being driven mainly by the fact that U.S. interest rates are now in principle heading upwards, even if the Federal Reserve doesn’t actually get round to hiking rates until well into next year, while Japan and the Eurozone are still trying to loosen monetary policy to stave off deflation. Since most of the world’s major commodities are priced in dollars, prices for them have been weakening as the dollar has strengthened. Crude oil hit a new four-year low of $76.48 on the New York Mercantile Exchange earlier, still under pressure after Tuesday’s news that Saudi Arabia had cut its official selling prices in the U.S. to defend its market share. Gold, meanwhile, slumped 2% to $1144 a troy ounce, its lowest level in over four and a half years. Fears of inflation drove the metal to nearly $2,000 an ounce during the years of aggressive monetary easing by the Fed, but that inflation has failed to materialize. Reuters reported Wednesday that the drop in prices is all the sharper because households in China and India, historically the world’s biggest end-consumers of gold, are waiting for it to fall further before stepping in.