US Dollar Strengthens on Housing, Durable Goods Data
The US dollar continued its upward ascent less than one week after the Federal Reserve announced plans to begin reigning in record stimulus. The greenback has been supported by improved sentiment and upbeat economic data, which have served to reinforce the Fed’s decision to pare back asset purchases by $10 billion beginning in January.
The dollar advanced more than 0.1 percent against a basket of its major competitors after government economists reported stronger than forecasted durable goods orders and new home sales. Orders for durable goods accelerated 3.5 percent in November, following a 0.7 percent decline the prior month, suggesting large-scale business investments picked up in the fourth quarter. A separate report from the Commerce Department showed sales of new single-family homes rose at an annual rate of 464,000 in November. Compared to year-ago levels, new home sales have risen 16.6 percent.
In Europe, the common currency continued to slide below the 1.37 US handle, hitting a session low of 1.3655 US. The EURUSD pair consolidated on a loss of around 20 pips, settling at 1.3678. The dollar’s gains didn’t extend to the British pound, which advanced 17 pips against the greenback after the British Bankers Association announced 45,000 mortgages had been approved in November, the highest level since December 2009.
Durable goods orders helped the greenback re-test a five-year high against the Japanese yen. The USDJPY hit a session high of 104.41 in North America before consolidating at 104.26. Last week the pair reached 104.62, the highest level since October 2008.
The Fed’s decision to pare asset purchases to a $75 billion monthly pace is expected to keep the dollar elevated heading into 2014. With the US economy stabilizing and less stimulus required, the central bank is paving the way for higher interest rates in 2015, which will make the greenback a more appealing option for global traders.
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