NEW YORK (Reuters) - The dollar rose for a fifth straight session on Tuesday after a slew of positive economic data boosted optimism about the U.S. recovery and added to expectations the Federal Reserve would scale back its stimulus measures.
The upbeat economic numbers have bolstered stocks and lifted U.S. Treasury yields, which in turn supported the dollar. The greenback has gained 3.5 percent so far this year against a major currency basket and 12.7 percent versus the yen.
“The better U.S. data today was a big positive driver for the dollar and the bias overall is still for dollar strength in the wake of the FOMC statement last week,” said Brian Kim, currency strategist at RBS Securities in Stamford, Connecticut.
Data showed on Tuesday that durable good orders increased by a better-than-expected 3.6 percent in May as demand rose for goods ranging from aircraft to machinery.
Separate data showed prices of U.S. single-family homes jumped in April to rack up their biggest annual gain in seven years, while a second report indicated sales of new U.S. single-family homes rose to their highest in nearly five years in May, confirming the housing market’s strengthening tone.
And in the final first-tier data report released on Tuesday, U.S. consumer confidence jumped in June to its highest in over five years.
“Today’s data was unequivocally good news for the economy,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. “But for Fed taper talk to really take flight, investors would want to see more concrete signs of improvement in the U.S. labor market.”
The dollar index .DXY, which measures the dollar against a basket of six major currencies, rose 0.2 percent to 82.563 for its fifth straight day of gains and remained near Monday’s near three-week peak of 82.841.
The dollar was flat against the yen at 97.76 yen, off Monday’s two-week high of 98.70.
The euro surrendered early gains and was last down 0.2 percent at $1.3095, after Monday’s low of $1.3058, its weakest level since June 5.
Earlier in the session, the dollar index slipped on Monday’s comments from Minneapolis Fed President Narayana Kocherlakota and Dallas Fed chief Richard Fisher who both reassured investors fearing the impact of the Fed eventually tapering its monthly $85 billion bond-buying program.
“The dollar has been trading on Fed speculation for the last two weeks,” said John Doyle, currency strategist at Tempus Inc in Washington. “Yesterday, comments from two Fed officials were more dovish than Bernanke but attention has now shifted to durable goods which were good for the ‘tapering sooner’ argument.”
Still, despite the good data, investors also cautioned that the dollar’s rally may have been too far, too fast.
“Whatever dollar rally we have today will be limited in scope,” said Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management in New York. “We have had a good run and the market will focus on nonfarm payrolls (reports) going forward.”
Schlossberg added that investors will also want to see the housing market recovery continue in the face of higher mortgage interest rates as yields rise.
Also on Tuesday IMF chief economist Olivier Blanchard said Fed talk of exiting its stimulus could spur volatility in global markets, and that recent movements had been exaggerated.
Volatility has also jumped due to turmoil in Chinese markets, which have been roiled by concerns about a potential money market squeeze. To calm nerves, China’s central bank said it would guide markets to reasonable rates.
Some $4.6 billion in euros changed hands globally as of Tuesday afternoon, using Reuters Dealing data, while $2.4 billion in yen traded.
Additional reporting by Nick Olivari; Editing by James Dalgleish