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Dollar hits 11-month high

Wednesday, August 20 08:32:57

The dollar touched an 11-month high against a basket of major currencies on Wednesday after positive U.S. housing data the previous day fed hopes that the world's biggest economy is strengthening.

The dollar index surged to as high as 81.995, its highest level since September. It last stood at 81.974, up 0.1 percent on the day.

The greenback rose broadly, sending the euro to a nine-month low, while the New Zealand dollar slid below support at levels near $0.8400 and fell to its lowest level in more than five months.

The dollar also scaled four-month highs against yen and the British pound.

The dollar was boosted by the release of data on Tuesday showing U.S. housing starts and building permits rebounded strongly in July, suggesting the housing market recovery was back on track after stalling in the second half of last year.

The U.S. 10-year Treasury yield last stood at 2.407 percent , having edged up over the past few days from a 14-month low of 2.303 percent set last Friday.

Some market participants said the greenback's rise had more to do with weakness in other major currencies, with the euro staying on the defensive, while sterling extended its losses after weaker-than-expected inflation data the previous day eased pressure on the Bank of England to raise interest rates.

The euro fell 0.1 percent to $1.3306, having touched a low of $1.3303, its lowest level since last November.

Its latest drop has brought the euro's decline from its 2 1/2-year peak reached in May to almost five percent. The common currency was hit by worries that tit-for-tat sanctions between the West and Russia could hurt the euro zone economy more than the United States because of its closer economic ties with Russia.

Even without the Ukraine crisis to contend with, the euro zone recovery had been tepid at best as the currency bloc's southern countries continue to struggle under the weight of tight fiscal policy aimed at reducing their debt load.

"The euro looks particularly weak. Investment into the euro zone could stall. I feel it's time to think that the euro will fall below $1.30," said Kyosuke Suzuki, director of forex at Societe Generale.

Against the yen, the dollar rose 0.2 percent to 103.15 yen . It touched a high of 103.23 yen earlier on Wednesday, the dollar's strongest level since April.

Next up for the dollar is the minutes of the Fed's July policy meeting, due later on Wednesday, although a bigger focal point may be Fed Chair Janet Yellen's speech on Friday at an annual gathering of central bankers in Jackson Hole, Wyoming.

Sterling set a fresh four-month low of $1.6604, and was last down 0.1 percent on the day at $1.6607.

The New Zealand dollar fell 0.4 percent to $0.8387, having fallen to as low as $0.8373 earlier on Wednesday, its lowest level since March. (Reuters)

For more visit: www.businessworld.ie