A dollar index rose by the fastest pace in four months after data indicated that U.S. labor market improved just before the Federal Reserve convenes to decide whether to increase interest rates.
The U.S. currency rallied 0.7 percent to trade at $1.3430 per euro, the most since June 13, and hit 1.3422, its highest level since November 21. The U.S. dollar extended its gain versus the yen for the second straight week, surging 0.5 percent to 101.84. The euro fell 0.2 percent to 136.77 yen.
“There’s broad dollar strength, but the question is whether the U.S. economy will strengthen sufficiently to put rates up,” Andrew Wilkinson, a Greenwich, Connecticut-based chief market analyst at Interactive Brokers LLC told Bloomberg. “There’s some kind of sea change happening to the euro. It has finally cracked lower.”
The greenback’s rise was fuelled by the jobless data that fell to its lowest level in eight years. The number of fresh applications for unemployment claims declined by 19,000 to 284,000 in the week through July 19, the lowest level since February 2006 according to the Labor Department. The Federal Reserve is expected to meet on July 29 to 30.
Meanwhile, the New Zealand dollar plunged by its steepest margin since January after the Reserve Bank of New Zealand said it would halt interest rate hikes. The kiwi fell 1.5 percent, and hit its lowest level in six weeks of 85.39 U.S. cents. The New Zealand currency fell after the central bank Governor Graeme Wheeler noted that its value is “unjustified and unsustainable”. Wheeler said he would retain the current 3.5 percent interest rate, halting a run that saw the central bank hike it four times this year. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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