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FOREX-US dollar gains broadly on Fed outlook, US economic data
June 20, 2013 / 5:59 PM / 4 years ago

FOREX-US dollar gains broadly on Fed outlook, US economic data

* Traders reestablish bets on dollar gains after Fed
    * U.S. Philly Fed, housing data stronger-than-expected
    * Euro hits two-week low vs dollar, may fall beneath $1.30

    NEW YORK, June 20 (Reuters) - The U.S. dollar climbed to
two-week highs against major currencies on Thursday and looked
likely to extend gains after the Federal Reserve signaled it
would begin withdrawing its stimulus programs this year as the
U.S. economy improves.
    Stronger-than-expected data on factory activity in the U.S.
mid-Atlantic region and in home resales added to the dollar's
momentum, overshadowing an earlier report showing a rise in
weekly jobless claims. 
    Investors re-established bullish bets on the dollar after
Fed Chairman Ben Bernanke, following the central bank's two-day
policy meeting that concluded on Wednesday, said the Fed was
likely to end its bond-buying program, known as quantitative
easing, by mid-2014.
    "The prospect of less QE (and) higher interest rates is
something that should help the dollar, particularly in an
environment where some other central banks are still moving in
the other direction," said Robert Lynch, senior currency
strategist at HSBC in New York.
    Benchmark U.S. Treasury yields rose to their
highest in almost two years after Bernanke's remarks. Traders of
short-term U.S. interest rate futures now expect the Fed to
begin lifting its target for short-term borrowing costs in late
    In contrast to the Fed's stance, the Bank of Japan recently
unveiled aggressive easing measures to fight deflation and
pledged to do more if needed. Pressure is also growing on the
European Central Bank to take steps to stem deterioration in the
euro zone's economy.
    Higher interest rates tend to favor a currency as investors
seek yield.
    The dollar index, which measures dollar performance against
a basket of currencies, hit a two-week peak of 82.145,
the strongest since June 6. It was last up 0.5 percent.
    Analysts said the dollar could see volatile moves in the
coming weeks as investors use every piece of economic data to
try to gauge the health of the economy. The Fed painted an
upbeat view of the economy on Wednesday, saying downside risks
to growth have receded.
    "Volatility is going to be the name of the game. We're going
to see some big ugly moves," said Ronald Simpson, managing
director of global currency analysis at Action Economics in
Tampa, Florida.
    The dollar's resurgence could put an end to the recent
resilience of the euro, potentially pushing it below $1.30 as
markets become wary about the prospect of lower ECB interest
    The euro fell 0.5 percent to $1.3223, with sentiment
hurt by surveys showing the euro zone private sector has yet to
make a steady recovery. It fell as low as
$1.3161, a two-week low.
    Supports are reported at the 100-day simple moving average
at $1.3094 and the 200-day SMA at $1.3072. Some US$5.4 billion
in euros changed hands on Reuters Dealing on Thursday. 
    "The U.S. growth story is still the most convincing in the
G4," said Valentin Marinov, currency strategist at Citigroup in
London. G4 refers to the economies of the United States, euro
zone, Japan and Britain.
    "$1.30 could be on the cards for euro/dollar heading into
the ECB meeting on July 4."
    Analysts at Westpac said they added a short euro position to
their portfolio and would add more on any rebound to $1.3350.
    The dollar rose 1.7 percent to 98.20 yen, having hit
98.28 yen, according to Reuters data, its strongest in more than
a week. Some analysts forecast a rise back above 100 yen due to
the contrast between the U.S. monetary policy outlook and
aggressive easing in Japan. Some US$3.8 billion in yen changed
hands on Reuters Dealing on Thursday 
    The dollar broke away from the pattern over recent weeks in
which it often fell against the yen in tandem with share prices.
U.S. shares fell more than 1 percent, while Japan's
Nikkei ended down 1.7 percent.
    The Australian dollar hit a 33-month low against the
dollar, tracking steep falls in riskier and emerging currencies
and after data showed China's manufacturing sector weakened in
June to a nine-month low..
    It hit a low of $0.9160 and was last down 1.1 percent at
$0.9192. The New Zealand dollar lost 1.9 percent to $0.7734

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