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US Dollar Touches more than 10-month High

H.S. Borji
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US Dollar Touches more than 10-month High

The US dollar advanced against a basket of currencies Tuesday, hitting a more than ten-month high as factory orders rebounded sharply and service activity rose to its highest level since January 2008.

The US dollar index, a weighted average of the dollar’s performance against six commonly traded peers, climbed 0.24 percent to 81.52.

Tuesday saw the greenback extend a three-week rally that has seen the US dollar index advance more than 1.6 percent.

In economic data, US factory orders advanced sharply in June, pointing to stronger manufacturing activity heading into the third quarter.

New orders for manufactured goods rose 1.1 percent in June, following a 0.6 percent decline the previous month, the Commerce Department reported today.

Factory orders had increased for three consecutive months before abruptly falling in May.

Increased demand for aircraft, machinery and computer products led the advance, official data showed. Demand for commercial aircraft rose 8.4 percent. Orders for machinery increased 2.9 percent, as did orders for computer and electronic products.

Compared to June 2013, factory orders were up 2.5 percent.

In a separate report the Institute for Supply Management said US service activity rose to its highest level since January 2008, led by the sharpest increase in new orders since August 2005.

ISM’s gauge of US service activity in July rose 2.7 percentage points to 58.7, exceeding estimates calling for a slight increase to 56.3.

A reading above 50 indicates expansion in the service economy, whereas a reading below that level signifies contraction.

The dollar posted sharp gains against the euro, as the EURUSD fell to a fresh nine-month high. The common currency was under pressure after Markit Group posted disappointing PMI figures.

Markit’s composite gauge of Eurozone business activity increased 1 percentage point to 53.8. Economists forecast a gain of 1.2 percentage points to 54.

The euro tumbled despite a surge in Eurozone retail sales. Retail sales in the 18-nation currency bloc advanced at an annual rate 2.4 percent in June, double the forecast rate, the European Commission reported today. That was the biggest annual gain in seven years.

The EURUSD tumbled 0.34 percent to 1.3377, rebounding from an intraday low of 1.3362. The pair has given up 3.2 percent over the past three months and is trading 300 pips below its long-run average.

The dollar edged lower against the British pound, which extended its rally to two days after UK construction PMI blew past economists’ forecast.

The UK construction sector expanded strongly in July, as activity rose at a faster pace and payroll numbers continued to rise markedly.

Markit’s UK construction index rose 1.4 percentage points to 59.1. Economists forecast a slight increase to 57.9.

The GBPUSD advanced 0.12 percent to 1.6881. The pair is trading around 20 pips above its 100-day simple moving average.

The greenback tread water against the Japanese yen, which could face greater price action later in the week with the release of key government growth indices and a monetary policy statement from the Bank of Japan.

The USDJPY was trading at 102.57, little changed from its previous close.

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