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Dollar Declines After U.S. Sales of New Homes Plunge in July

The dollar declined against the euro after purchases of new U.S. homes unexpectedly fell by the most in more than three years in July.

The Bloomberg U.S. Dollar Index dropped for the first time in three days after June’s new-home sales number was also revised down. The greenback still rose this week after Federal Open Market Committee minutes released showed most officials are comfortable with a plan to start reducing bond purchases if the economy improves. The Canadian dollar rebounded from a six-week low versus the U.S. currency. The real surged after Brazil announced an intervention program.

“Even though new-home sales data haven’t really been stellar, I think what we need is for the data to actually turn to the extent that shows the Fed was wrong,”said Geoffrey Yu, a senior currency strategist at UBS AG in London. “We haven’t had a critical mass of negative data yet to derail the Fed. It’s a speed bump more than anything.”

The dollar declined 0.2 percent to $1.3383 per euro at 5 p.m. in New York after earlier gaining 0.2 percent. The yen was little changed at 98.72 per dollar after touching 99.15, the weakest level since Aug. 5. Japan’s currency dropped 0.2 percent to 132.1 per euro, extended its weekly loss to 1.6 percent.

The Bloomberg U.S. Dollar Index, which tracks the currency against a basket of its 10 major counterparts, fell 0.2 percent to 1,026.15 after climbing 0.2 percent. It reached 1,031.37 yesterday, the highest level since Aug. 2, and gained 0.4 percent this week.

Real, Rupiah

Canada’s dollar rose 0.2 percent to C$1.0496 after touching C$1.0568, weakest intraday level since July 9, as a report showed the country’s consumer price index rose less than the central bank’s inflation target for a 15th month.

Brazil’s currency gained after the central bank stepped up efforts to arrest the world’s second-worst currency decline, announcing a $60 billion intervention program involving currency swaps and loans. The real jumped 3.6 percent to 2.3488 per U.S. dollar.

Indonesia’s rupiah rebounded from a four-year low after the central bank announced measures to boost foreign-currency supply. The rupiah gained 0.4 percent to 10,780 per dollar.

India’s rupee jumped 2 percent to 63.3300 per dollar to pare a weekly drop to 2.7 percent as Asia’s No. 3 economy faces risks from a current-account deficit that’s not sustainable, slowing growth, a budget gap and rising bad loans at banks, the Reserve Bank of India said.

South Africa’s currency gained, paring a second straight weekly drop on signals from emerging-market nations that they may support markets. The rand advanced 0.4 percent to 10.2438 per dollar.

Home Sales

The greenback fell as sales of newly built homes declined 13.4 percent to a 394,000 annualized pace, the weakest since October, following a 455,000 rate in the prior period that was lower than previously estimated, Commerce Department figures showed in Washington. The median estimate of 74 economists surveyed by Bloomberg called for a decrease to 487,000. Last month’s decline was the biggest since May 2010.

Purchases of previously owned homes jumped in July to the second-highest level in more than six years, data showed Aug. 21.

“New-home sales data was weak, but the existing-home sales was very good -- there’s nothing that changes the FOMC general picture that the housing market continues to recover,” Greg Anderson, head of global foreign exchange strategy at Bank of Montreal, said by phone from New York. “Dollar-Canadian dollar, dollar-yen certainly have shown a reversal of trends from the past 48 hours, although it might have been ripe for Friday afternoon profit-taking anyway.”

Euro Rally

The Fed’s debate over when to taper $85 billion in monthly bond buying has roiled financial markets around the world and sparked a selloff in fixed-income assets. The central bank is buying $45 billion of Treasuries and $40 billion in mortgage bonds each month. U.S. policy makers next meet on Sept. 17-18.

The euro registered its biggest five-day rally against the yen in five weeks after European Central Bank Governing Council member Ewald Nowotny said good economic news removed the need for further interest-rate cuts.

Euro-area consumer confidence increased more than economists estimated in August, the European Commission in Brussels said in a preliminary report today. An index of household confidence in the 17-nation bloc improved for a ninth month to minus 15.6, the highest level since July 2011, from minus 17.4 in the previous month.

Options Trading

Trading in over-the-counter foreign-exchange options totaled $17 billion, compared with $24 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $3.7 billion, the largest share of trades at 21 percent. Options on the euro-yen rate totaled $1.5 billion, or 8.7 percent.

Greenback-yen options trading was 35 percent less than the average for the past five Fridays at a similar time in the day, according to Bloomberg analysis, and euro-yen options trading was 32 percent above average.

Traders reduced bets the yen will weaken, according to data from the Commodity Futures Trading Commission. The difference in the number of wagers by hedge funds and other large speculators on a decline in the currency compared with those on a gain -- so-called net shorts -- was 71,721 on Aug. 20, compared with 74,462 a week earlier.

The dollar appreciated 4.8 percent this year, the best performer after the euro among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro advanced 6.5 percent, while the yen slumped 9.2 percent.

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