US Dollar Continued To Rally On Better Than Expected Data
Global markets reacted on Tuesday to a broad range better than expected US economic data. Federal Reserve Chair Janet Yellen was clearer than ever on Friday that the central bank was poised to raise interest rates this year, as the U.S. economy was set to bounce back from an early-year slump and as headwinds at home and abroad waned. Asian markets are trading lower as string of positive data from the US has raised rate hike bets in the world’s largest economy. U.S. CORE durable goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 1.0 percent last month after an upwardly revised 1.5 percent increase in March, according to the Commerce Department. New U.S. single-family home sales rose 6.8% more than expected in April and the median price surged, suggesting the housing market recovery was gaining traction. U.S. consumer confidence improved to 95.4 more than expected in May 95.2, easing concerns over the health of the economy, industry data showed
The dollar climbed more than 1 percent against other major currencies on Tuesday, extending recent gains on upbeat data that lifted expectations the Federal Reserve will start raising U.S. interest rates in 2015. The dollar climbed to its highest in nearly eight years against the Japanese yen and pushed the euro, already weighed down by anxieties over Greece’s financial crisis, below $1.09 for the first time in a month. The euro fell to $1.0850 to more than a month’s low as Greece nears its Jun 5th debt repayment deadline. The nation owes 1.6 billion euros to the International Monetary Fund, and 300 million Euros are due early next month. Dollar strength on rate hike hopes adding more weaknesses.
The Japanese yen broke the 123 range as the US dollar continued to rally and eased a bit in the Asian session after the release of Bank of Japan minutes from its last meeting. The Bank of Japan’s decision makers expect private consumption will remain resilient as incomes are improving, but they remained concerned their 2 percent inflation goal would be difficult to keep, meeting minutes show. Some members said consumer price inflation wouldn’t reach the target in fiscal 2017, although they agreed that longer term inflation expectations appear to be rising, the minutes of last month’s meeting show. The BOJ has pushed back its timeline for reaching its inflation target to fiscal 2016 and minutes show members expect to tap the target then.
The pound fell by 0.2 percent yesterday as hawkish comments by Janet Yellen led to strength seen in the US Dollar Index and exerted pressure on the currency. However, sharp losses were capped owing to low volatility and weakness in the Euro. The currency made an intraday low of 1.1.5454. Sterling was on track for its biggest fall against the dollar in three weeks on Friday after a stronger-than-expected rise in U.S. core consumer prices in April revived bets that inflation may reach the Federal Reserve’s 2 percent target. If the upturn continues, it could allow the Fed to consider raising interest rates later this year, providing a boost to the dollar. Earlier, sterling hovered near a 7-year high against a trade-weighted basket of currencies, buoyed by robust data that bolstered a view that the British economy was outperforming its peers.
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