The dollar advanced against the euro as the market awaited key data that will show that the U.S. economy is gaining momentum, spurring demand for US assets relative to the European ones.
The dollar gained 0.3 percent to trade at $1.3389 per euro at 6:26 a.m. in New York. The US currency had earlier touched $1.3367 nearly a week ago, its highest level since November 12. The dollar remained slightly unchanged at 102.68 yen, while the yen rose 0.1 percent to 137.47 against the euro.
“The economic recovery in the U.S. means yield differentials are working in favor of the dollar,” Hans-Guenter Redeker, a London-based head of global currency strategy at Morgan Stanley told Bloomberg. “We are bullish on the dollar.”
Indicators of a resurgent US economy have boosted Treasury yields relative to their peers to a four-year high last week. The yield differential between US Treasuries against other advanced-economy government bonds expanded 0.32 percentage point last Wednesday, the biggest gap since April 2010. The spread stood at 0.28 percentage point on Monday.
Key US economic data expected this week include July factory orders, which are projected in a Bloomberg survey to have increased 0.6 percent, compared to 0.5 percent in June. The Institute of Supply Management’s services index is also expected, with analysts predicting it will increase to 56.5 in July, up from June’s reading of 56.
Meanwhile, the South Korea won appreciated against its 16 major counterparts after the nation’s FX reserves rose to $368 billion in July compared with $366.6 billion in June. The country’s imports surged 5.7 percent in July from a year ago, official data released last Friday showed. The won rallied 0.5 percent to 1,028.30 per dollar at the close of trade in Seoul, extending Monday’s 0.3 percent gain. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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