Dollar Surges after US Housing Starts Increase Faster than Expected

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Dollar Surges after US Housing Starts Increase Faster than ExpectedThe dollar surged to its strongest level in nine months against the euro after U.S. housing starts touched an eight-month high, indicating that the U.S. economy is getting stronger.

The greenback advanced 0.3 percent to trade at $1.3318 per euro as of 10:36 a.m. in New York and touched the highest level since November 7. The U.S. dollar gained 0.2 percent to 102.75 yen. The euro plunged 0.1 percent to 136.89 yen.

U.S. home construction starts grew 15.7 percent to an annualized pace of 1.09 million, compared with 945,000 in June, reported the Commerce Department. Economists surveyed by Bloomberg News had expected the number of housing starts to be 965,000 in July.

“This indicates the housing market has rebounded, which should provide some support for U.S. economic growth,” Michael Woolfolk, a New York-based global-markets strategist at Bank of New York Mellon, told Bloomberg. “It’s a real boost of confidence to growth expectation, though the dollar won’t really get significant upside performance until the Fed” sends out strong signals of tightening. Woolfolk forecast the dollar will rise to $1.22 per euro in 12 months.

The pound declined to its weakest level in four months against the U.S. currency after data indicated that UK consumer-price inflation dropped to 1.6 percent in July from a year earlier, compared with 1.9 percent in June. The UK currency fell 0.7 percent to trade at $1.6617 after touching the weakest level since Apr. 8.

The New Zealand dollar plunged after the nation’s statistics office reported that producer output prices dropped 0.5 percent in the April-June quarter from the first quarter, when they grew 0.9 percent. New Zealand’s input prices plunged 1 percent in the second quarter, paring a 1 percent advance in the previous three months. The kiwi retreated 0.4 percent to 84.43 U.S. cents, posting its biggest drop since August 5.To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com