Forex News: Currency Briefing – Dollar strengthens versus most peers
A popular gauge of the dollar’s strength hit a two-week high Wednesday, adding to gains in the wake of a report that showed the fastest pace of new-home sales in more than five years.
New-home sales jumped 9.6% in January to a seasonally adjusted annual rate of 468,000, data showed Wednesday. Economists surveyed by Dow Jones forecast January home sales would fall to an annual pace of 401,000.
The dollar has risen against the euro this month as new-homes sales surprisingly picked up last month, boosting speculation Federal Reserve Chair Janet Yellen will repeat the central bank’s plan to continue to cut bond-buying when she testifies before a Senate Banking Committee today (15:00 UTC).
Yellen said this month the economy has strengthened enough to withstand cuts to monetary stimulus, adding that only a notable change to the outlook would prompt the central bank to slow the pace of tapering its bond purchases.
The ICE dollar index, a gauge of the U.S. unit’s strength against six other currencies, rose to 80.461 after Yellen said this month that the economy has strengthened enough to withstand cuts to monetary stimulus.
She added that only a notable change to the outlook would prompt the central bank to slow the pace of tapering its bond purchases late Tuesday, the highest level since Feb. 12, according to FactSet.
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The WSJ Dollar index, which tracks the greenback against a broader basket of currencies, increased to 73.79 from 73.55. The dollar was at 102.24 yen versus 102.18 yen late Tuesday, while the Australian dollar declined to 89.73 U.S. cents from 90.16 U.S. cents. U.S. stocks rose Wednesday. The euro fell to $1.3662 from $1.3740 late Tuesday.
The British pound weakened to $1.6624 from Tuesday’s level of $1.6673. The U.K.’s gross domestic product increased 0.7% in the last three months of 2013 from the previous quarter, matching the preliminary estimate, according to data from the Office for National Statistics.
The greenback rose against the Turkish lira, Mexican peso and South African rand on Wednesday. The dollar has gained 2.2% against the lira this week compared with a month-to-date decline of 1.5%. Still, for the year, the dollar has jumped 3.7% against the lira.
Investors watched China’s yuan closely, which saw a deepening fall on Wednesday as the country’s central bank guided the currency lower again.
Evan Lucas, a market strategist for IG Group, said recent sharp declines in the yuan may be mainly driven by the PBOC, which is trying to ward off speculators ahead of the expected widening of the currency’s trading band.
“Having seen the [yuan] appreciate 35% against the greenback since the relaxation of the peg system in 2005, this looks to be an indirect move for a weaker currency to minimize the current perception of one-way bets on the yuan’s appreciation,” Lucas said.