August 29, 2013 / 4:02 PM / 4 years ago

FOREX-Dollar climbs to two-week peaks on upbeat U.S. data

* U.S. GDP, initial jobless claims data support Fed taper in
September
    * Dollar rises vs yen as Syria tension eases
    * Emerging currency relief also seen supporting case for Fed
tapering

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Aug 29 (Reuters) - The dollar rose to two-week
highs on Thursday, on track for its largest daily gain against
the euro in more than four months, after robust U.S. economic
data suggested the world's largest economy was turning a corner.
    The reports bolstered expectations the Federal Reserve could
from next month begin scaling back its massive asset-buying
plan, a view that had been undermined of late by a series of
weak U.S. housing numbers.
    But data on Thursday showed that the U.S. economy
accelerated in the second quarter more quickly than expected,
growing 2.5 percent in the April-June period, thanks to a surge
in exports. 
    "This is a good report for those who expect the Fed to taper
in September," said Vassili Serebriakov, currency strategist at
BNP Paribas in New York.
    "One of the key concerns that the Fed has voiced recently
has been the dichotomy between firm employment and soft GDP
growth. This should ease some of those concerns," he said.
    Still, Serebriakov doubted that the reports would sway the
minds of market participants who believe the Fed will not begin
to scale back its stimulus in September. 
    BNP Paribas, for one, has long held the view that the Fed
will start winding down its asset purchases in December, noting
that the U.S. economy is not yet at the point that would justify
a tapering, he added.
    Bob Lynch, head of G10 FX strategy at HSBC in New York, said
he is not sure whether or not the second-quarter GDP data will
play a major role in the Fed's policy deliberations.
    "Much of the 'later this year' tapering guidance from Fed
Chairman Bernanke and other Fed officials is predicated on an
expected rebound in growth in the second half of this year,"
Lynch said.
    "So in that regard, the revised Q2 GDP data are more
backward-looking and the upcoming growth numbers - and the Fed's
expectations - should play the bigger role in the policy
debate," he added.
    The dollar was last 0.8 percent higher against a basket of
currencies at 82.054, after hitting a high of 82.067, the
highest since Aug. 5. Against the safe-haven Japanese yen
, the greenback traded up 0.9 percent at 98.45 yen.
    The euro, meanwhile, plunged 0.9 percent against the
dollar to $1.3221, on pace for its worst daily performance since
mid-April. It earlier touched a low of $1.3218, a two-week
trough.
    The greenback was also supported by a fall in U.S. jobless
claims to a seasonally-adjusted 331,000. 
    Market sentiment was still cautious, but prospects of an
imminent Western attack on Syria weakened, given opposition in
Britain and among U.S. lawmakers. 
    U.S. Treasury yields rose on Thursday, raising
the dollar's appeal, after having fallen in recent days as
investors sought refuge in low-risk government debt.
    Some said reduced tension in emerging markets also supported
the U.S. currency as it reinforced bets the Fed would crimp
monetary stimulus soon. 
    "A slight easing of the tensions in Syria and emerging
markets, has helped the dollar," said Simon Derrick head of
currency research at Bank of New York Mellon.
    "Over the last few weeks tensions in emerging markets were
seen as keeping pressure on the Fed to delay tapering which is
dollar negative. With emerging markets now doing a little
better, the dollar is higher."
    Analysts at Morgan Stanley expect the dollar to regain
support against major currencies "as risk aversion eases,
allowing some stabilization in risky asset markets and
potentially providing some relief to emerging currencies."
    Emerging markets, the first to be hit by outflows of funds
as investors braced for an eventual end to the Fed's monetary
stimulus, have experienced more turbulence as the Syria crisis
makes investors even more risk-averse.
    While a debt auction in Italy was relatively successful,
borrowing costs for a new five-year bond rose as investors
remained wary about the coalition government's stability, which
weighed on the euro. 
    The euro's recent resilience is likely running out of steam,
according to the options market.

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