* Euro falls after hitting one-month high against dollar
* German, French PMI surveys support euro
* Australian dollar falls as HSBC's China flash PMI slides
By Gertrude Chavez-Dreyfuss
NEW YORK, July 24 The dollar rallied across the
board on Wednesday, bolstered by a rise in U.S. Treasury yields
that indicate confidence in the economic recovery and
expectations that the Federal Reserve will pare back its
Better-than-expected U.S. housing data also supported the
dollar, which rose for the first time in four sessions against a
basket of currencies.
In the U.S. Treasuries market, the yield on the benchmark
10-year note rose to 2.581 percent. A U.S. Treasury sale on
Wednesday of $35 billion in new five-year notes met with
relatively low demand.
"The dollar is being supported by higher yields right now,
suggesting that the ongoing recovery in the U.S. is still
positive overall," said Brian Kim, currency strategist, at RBS
Securities in Stamford, Connecticut.
U.S. new-home sales jumped to a five-year high in June,
while other data on Wednesday showed an acceleration in factory
activity in July, boosting hopes of a third-quarter pick-up in
In late afternoon trading, the dollar index gained 0.4
percent to 82.272, rising after three days of losses.
"Positive U.S. data tends to fuel demand for the dollar
given the Fed's data-driven outlook for monetary policy," said
Joe Manimbo, senior market analyst at Western Union Business
Solutions in Washington.
The euro, on the other hand, fell from a one-month high of
$1.3256 reached earlier to trade 0.2 percent lower on the day.
It was last at $1.3198. There were offers to sell the euro above
$1.3260/70, particularly from Asian central banks.
Volume on the euro/dollar pair totalled $4.6 billion on the
Reuters FX platform.
Europe's common currency earlier hit a one-month high
against the dollar on a quicker-than-anticipated expansion in
German and French private sector business activity, a sign of
recovery in the euro zone economy.
German and French PMI surveys both beat expectations and led
some investors to trim bets against the euro. Overall, the
business polls indicated that the euro zone economy was likely
to expand in the current quarter.
That news was in stark contrast to the weaker PMI data out
of China, which had triggered safe-haven inflows into the U.S.
dollar and toppled the growth-linked Australian dollar from a
"The euro rally earlier reflects the outperformance of the
German and French PMI data, which contrasted with some of the
key PMI releases overnight such as China," said Greg Moore,
currency strategist, at TD Securities in Toronto.
Given "forward guidance" from the European Central Bank that
it will keep monetary policy accommodative and perhaps even
lower rates to boost growth, any euro gains are likely to be
held in check, traders said.
In contrast to the ECB, the Federal Reserve is considering
scaling back its ultra-loose monetary stimulus as the U.S.
economy outperforms, although it is keeping its options open
should the economy weaken again.
The contrast in the ECB's and the Fed's monetary policy has
led to a widening in yield spreads between U.S. Treasuries and
While spreads have narrowed since Fed Chairman Ben Bernanke
indicated that any slowing of the U.S. central bank's stimulus
would be data-dependent, the gap between the benchmark 10-year
bonds remains near its highest in almost
In other currencies, the Australian dollar, which is
highly sensitive to economic data from China, fell sharply after
the China PMI data. It was last trading 1.4 percent lower at
US$0.9165, down from an intraday high of US$0.9317.
The dollar was 0.9 percent higher against the yen at 100.29
yen, while the euro rose 0.7 percent versus the Japanese
currency to 132.34 yen
Just $1.5 billion changed hands on Wednesday, using Reuters