The dollar stood near a two-month peak against a basket of currencies on Wednesday after robust U.S. housing data supported the case for the Federal Reserve to raise interest rates in the near term.
The U.S. currency also gained on the safe-haven yen as investor risk aversion ebbed on the back of a bounce in European and U.S. equities.
The dollar index was up 0.3 percent at 95.618 .DXY, not far from the two-month high of 95.660 climbed overnight after data showed new U.S. single-family home sales surged to a more than eight-year peak in April and prices hit a record high. ECONUS
The upbeat housing numbers backed the Fed’s April policy meeting minutes, released last week, which hinted that the central bank may raise rates soon if the economy appeared strong enough.
The euro was steady at $1.1139 EUR=, within reach of $1.1133, its lowest level since March 18 plumbed on Tuesday when it sank 0.7 percent.
The dollar was up 0.1 percent at 110.090 yen JPY=, pulling ahead from Tuesday’s low of 109.170 reached amid a slide in Japanese shares. The greenback edged back closer to 110.590 yen, a three-week peak scaled last week.
“The dollar may need further incentives to challenge recent highs and climb yet higher. These fresh incentives could come in the form of more data due later this week, and Japan’s stance on fiscal stimulus, which would in turn boost the Nikkei and improve risk appetite,” said Shin Kadota, chief Japan FX strategist at Barclays in Tokyo.
The dollar could take its cues over the next few days from data including U.S. initial jobless claims and pending home sales on Thursday and Japanese inflation and U.S. first quarter GDP figures on Friday. ECONUS ECONJP
Fed Chair Janet Yellen is also due to speak on Friday, which is also the concluding day for the Ise-Shima G7 Summit being held in Japan.
Once the G7 summit is out of the way, markets will be focusing whether Tokyo may look to postpone a sales tax hike and implement fiscal stimulus steps.
Elsewhere, “Brexit” themes continued to sway the pound, which soared overnight when the latest poll showed strong support for Britain to remain in the European Union.
Sterling traded at $1.4613 GBP=D4 after advancing to a five-day high of $1.4641 on Tuesday, when it gained more than 1 percent.
The Australian dollar was little changed at $0.7188 AUD=D4, pulling back slightly from a near three-month trough of $0.7145 touched overnight.
The Aussie was hit after the market took comments by Reserve Bank of Australia Governor Glenn Stevens to mean the central bank could further ease monetary policy in coming months.
Surprisingly low inflation prompted the RBA to cut the cash rate to a record low 1.75 percent earlier this month and has investors betting on at least another easing this year.
Courtesy : reuters.com