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US dollar strengthens as risk aversion fades

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US dollar strengthens as risk aversion fades

The US dollar soared against a basket of its major peers after Iran agreed to limit its nuclear program, concluding a weekend of intense talks between it and the P5+1 nations. The diplomatic resolution spurred demand for the US dollar, which strengthened across the board.

Iran has agreed to halt uranium enrichment beyond 5 percent in exchange for more than $7 billion worth of sanctions relief. The agreement was reached in Geneva, Switzerland. The P5+1 nations include the United States, Russia, China, United Kingdom, France and Germany.

The dollar index rose more than 0.3 percent to surpass 81.00, gaining traction against most of its major peers. The dollar’s gains weren’t restrained by the sharp decline in pending home sales, which fell 0.6 percent in October and at an annualized rate of 1.6 percent.

In Europe, the common currency fell 39 pips against the greenback, falling to a session low of 1.3491 US before consolidating north of the 1.35 handle. The British pound plunged 82 pips to 1.6149 US, after the British Bankers’ Association reported a decline in mortgage approvals. In total, 42,800 mortgages were approved in October, compared to 43,200 the prior month.

The commodity-driven peers also fell against the greenback. The Canadian dollar fell more than 0.3 percent, sending the USDCAD to 1.0554. The pair’s 52-week high is 1.0607. Down-under, the Australian dollar fell 0.1 percent to 0.9160.

The Japanese yen tested a six-month low on waning risk-aversion; the USDJPY faced resistance at 101.90. The pair consolidated on a gain of 39 pips in North America, settling around 101.68.

The days ahead will be active for US dollar peers, led by government reports on housing starts, building permits and durable goods. The Conference Board and University of Michigan will each release monthly indicators on consumer confidence, which will be closely monitored leading up to the holiday season.

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