The dollar rose by the most in five months against the euro as U.S. stocks surged after better-than-expected data on capital goods orders bolstered the outlook for economic growth.
The greenback advanced against most of its major peers as U.S. stocks staged their biggest rally since 2011 after markets from Asia to Europe fell amid the worst global equity rout in almost four years. The dollar pared gains, and later resumed its climb, after Federal Reserve Bank of New York President William Dudley said the case for raising U.S. interest rates in September is less compelling amid recent market turmoil.
“I do believe there will be strength” in the dollar, Jennifer Vail, head of fixed-income research in Portland, Oregon, at U.S. Bank Wealth Management, said by phone. “However, it’s going to be modest until there’s some greater clarity about the timing of liftoff.”
The dollar advanced 1.8 percent to $1.1314 per euro at 5 p.m. in New York, the biggest increase since March 19. It gained 0.9 percent to 119.92 yen, the most since July 10. The Bloomberg Dollar Spot Index rose 0.7 percent to 1,202.94.
Orders for capital goods increased in July by the most in more than a year, data from the Commerce Department showed Wednesday in Washington. Orders for all durable goods -- items meant to last at least three years -- rose 2 percent, exceeding all forecasts of economists surveyed by Bloomberg.
“The durables is a nice surprise and continues to suggest that U.S. data is holding,” Matt Derr, a foreign-exchange strategist at Credit Suisse Group AG in New York, said by e-mail. “The trick for us is to see global risk sentiment calm down -- in terms of whether or not the Fed will hike in the coming months.”
Traders have reduced the probability that the Fed will raise rates at its September meeting to 24 percent, from 48 percent on Aug. 18. The calculation is based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase.
About $8 trillion in market value has been wiped from equity markets worldwide since China’s central bank began devaluing the yuan on Aug. 11. A gauge of currency volatility climbed to the highest since February on Tuesday.
The euro weakened for a second day versus the dollar as European Central Bank Executive Board member Peter Praet said the outlook for inflation may have worsened and that the ECB was willing to act if needed.
“Recent developments in the world economy and in commodity markets have increased the downside risk of achieving the sustainable inflation path towards 2 percent,” he told reporters in Mannheim, Germany.