Dollar Gains to 4-Week High as Economy Expands, Claims Decline
The dollar rose to the highest level in four weeks as reports showed U.S. economic growth accelerated and jobless claims declined, backing the case for the Federal Reserve to reduce stimulus as soon as next month.
The U.S. currency advanced for a second day versus the yen as benchmark Treasury yields climbed toward a two-year high, bolstering the attraction of the dollar. India’s rupee jumped more than 3 percent after the central bank said it will sell dollars to the nation’s biggest oil importers to cool demand for foreign exchange. The euro fell against the majority of its 16 most-traded counterparts.
“The Fed could taper as early as next month -- jobless claims continue to show gradual improvements,” Eric Viloria, senior currency strategist for Gain Capital Group LLC in New York, said in a telephone interview. “The dollar is stronger than all of the Group of 10 currencies because of easing of concerns on Syria.”
The Bloomberg U.S. Dollar Index rose 0.5 percent to 1,033.48 at 5 p.m. New York time after touching 1,034.03, the highest since Aug. 2.
The U.S. currency advanced 0.7 percent to 98.35 yen after gaining 0.6 percent yesterday. The greenback strengthened 0.7 percent to $1.3241 per euro after adding 0.9 percent, the biggest one-day gain on an intraday basis since July 4. The yen gained was little changed at 130.22 per euro.
Britain’s pound gained 2 percent against the greenback this month, the best performance among the major currencies, while the African rand had the biggest loss, at 4.7 percent. The euro and yen each lost 0.5 percent.
The Turkish lira and Israeli shekel reversed declines as expectation of an imminent military strike on Syria receded as the U.K. and France said they favor waiting for the results of a United Nations investigation into alleged use of chemical weapons.
“Threat of military action in Syria led to a classic risk-off move,” ABN Amro Group NV strategists Georgette Boele and Peter de Bruin in Amsterdam wrote today in a note to clients. “But it already seems to be losing steam, and is likely to prove short-lived.”
The lira gained 0.1 percent to 2.0358 per dollar after depreciating to 2.0730 yesterday, a record according to data compiled by Bloomberg since 1981. The shekel rallied 0.8 percent to 3.6234 a dollar.
The rupee halted a three-day slide after the Reserve Bank of India said it will provide foreign currency to state-run Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp., which the central bank will later repurchase.
India’s currency surged 3.3 percent to close at 66.595 per dollar in Mumbai. It has still tumbled 16 percent in the past three months and slid to a record 68.845 yesterday.
The dollar extended gains as as gross domestic product rose at a 2.5 percent annualized rate, up from an initial estimate of 1.7 percent, Commerce Department figures showed. The median forecast of 79 economists surveyed by Bloomberg projected a 2.2 percent gain.
Jobless claims in the week ended Aug. 24 dropped 6,000 to 331,000 from a revised 337,000 the week before, the Labor Department said. Another survey called for a drop to 332,000.
Fed policy makers are debating whether the U.S. economy is strong enough to allow them to pare back monthly purchases of $85 billion in Treasuries and mortgage debt. Officials will reduce the amount at their next meeting on Sept. 17-18, according to 65 percent of economists in an Aug. 9-13 Bloomberg survey.
The dollar gained against the majority of its most-traded peers as the Treasury 10-year yield rose as high as 2.83 percent after climbing to 2.93 percent on Aug. 22, the highest since July 2011.
“The fact that U.S. yields are squeezing up again is reasonably significant and we are coming back to the assumption that the data is a little more relevant,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “That’s providing some impetus for the dollar.”
The greenback has advanced 5.7 percent this year, the best performer after the euro of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The common currency rose 6.1 percent, while the yen tumbled 8 percent.
Trading in over-the-counter foreign-exchange options totaled $15 billion, from $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 euro-dollar exchange rate amounted to $2.2 billion, the largest share of trades at 15 percent. Options on the dollar-yen rate totaled $2.1 billion, or 15 percent.
Euro-dollar options trading was 3.2 percent less than the average for the past five Thursdays at a similar time in the day, and greenback-yen trading was 66 percent less, according to Bloomberg analysis.
Australian dollar-yen options trading, at $302 million, was 68 percent above average. The Aussie gained for a second day, rising 0.6 percent to 87.83 yen.
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