Reuters logo
FOREX-Dollar hits 3-week high as U.S. data spurs Fed taper talk
August 29, 2013 / 8:48 PM / 4 years ago

FOREX-Dollar hits 3-week high as U.S. data spurs Fed taper talk

* U.S. GDP, jobless claims support Fed taper in September
    * Dollar rises vs yen as Syria tensions ease
    * Dollar downside seen as limited on speculator position

    By Julie Haviv
    NEW YORK, Aug 29 (Reuters) - The dollar rallied to a more
than three-week high against a basket of major currencies on
Thursday after strong U.S. data emboldened the view that the
Federal Reserve could begin winding down its stimulus program
next month.
    The Commerce Department reported the U.S. economy grew at a
2.5 percent annual rate in the April-June period, more than
double the pace clocked in the prior three months, 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 data would sway some
market participants who believe the Fed will not begin to scale
back its stimulus until later.
    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.
    Also on Thursday, the government reported the number of
Americans filing new claims for jobless benefits fell last week,
a potential sign of faster hiring in August. 
    Should the U.S. nonfarm payrolls report for August, which is
 due out on Sept. 6, show strong gains, it will cement
expectations the Fed will scale back its asset-buying plan at
its next policy meeting next month.
    The dollar was last 0.7 percent higher against a basket of
six major currencies at 81.958, after earlier rising as
high as 82.067, its highest level since Aug. 5. 
    Against the safe-haven Japanese yen, the greenback traded up
0.7 percent at 98.28 yen.
    "Geopolitical jitters abated, but are likely to remain at
elevated levels for the foreseeable future," said Joe Manimbo,
senior market analyst at Western Union Business Solutions in
Washington, D.C.
    "As a result, investors would likely head into the long U.S.
holiday weekend favoring the greenback," he said. "Investors
remain in wait-and-see mode and were likely to tread cautiously
ahead of next week's U.S. jobs report."
    Worries over Syria have continued to cast a shadow on
investor confidence, but expectations of imminent turmoil eased
as the diplomatic process was seen playing out into next week,
and the White House emphasized that any action would be "very
discrete and limited," and in no way comparable to the Iraq war 
    Data on Friday on U.S. consumer spending and sentiment and
Midwest manufacturing could boost the dollar.
    "Outcomes that build on today's optimism would lend more
durable support to the dollar," Manimbo said. 
    Some said reduced tension in emerging markets also supported
the U.S. currency as it reinforced bets the Fed would crimp
monetary stimulus soon. 
    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 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. 
    Meanwhile, the euro's recent resilience is likely running
out of steam, according to the options market. 
    The euro plunged 0.8 percent against the dollar to $1.3234
, on pace for its worst daily performance since mid-April.
It earlier touched a two-week trough of $1.3218, according to
Reuters data.

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below