Dollar Higher After Strong U.S. Data, ECB Bond Comments

 
   By Hiroyuki Kachi 
 

        The dollar hit a two-month high against the yen and stretched gains against the euro in Asia trade Wednesday, tracking overnight strength on upbeat U.S. data and remarks suggesting a front-loading of European Central Bank bond purchases.
        The greenback touched Y121.00 around 0525 GMT, its highest level since March 20, though the upward momentum had largely lost steam midway through afternoon trading. The dollar was at Y120.69 late Tuesday in New York. The euro was lower at $1.1134 from $1.1150, and at Y134.68 from Y134.54.
        The dollar maintained its overnight momentum against the euro after the European Central Bank signaled it would front-load bond purchases under its EUR1.1 trillion program in the coming weeks. The U.S. currency got another boost from better-than-expected U.S. housing starts data in April, lowering skepticism about the economy's bleak picture after data showing a slowdown in the January-March quarter.
        These fresh cues enabled the dollar to break free from its recent trading straitjacket between Y118.50 and Y120.50.
        But the dollar's uptick seemed to run its course in afternoon trading, in a sign that investors were likely switching to a wait-and-see stance ahead of fresh potential trading cues such as Federal Open Market Committee minutes to be published later Wednesday.
        "Attention is paid to how the Federal Reserve views the economy," in the upcoming minutes amid weak rises in consumer spending and wages, said Toshihiko Sakai, senior manager of forex and financial products trading division at Mitsubishi UFJ Trust and Banking.
        A slew of selling orders placed above the current levels also made any further upward progress heavy-going for the greenback. Many of the sell orders have been placed by Japanese exporters looking to snap up dollars for commercial trade settlements.
        "Many investors are keeping up with the dollar buying, but they only half believe" in the U.S. recovery, since it is only based on a single month's housing data, said Toshiyuki Umekawa, senior vice president of the forex division at Mizuho Bank.
        During Asia trade, Japan's stronger-than-expected economic growth for the January-March quarter also offered indirect support for the dollar by giving a lift to the stock market. The benchmark Nikkei Stock Average was up 1.1% following the release of the gross domestic product data.
        Buoyed by household and business spending and a pickup in inventories, Japan's real GDP grew 2.4% in annualized terms in the first three months of 2015, larger than a 1.5% expansion forecast by economists surveyed by The Wall Street Journal.
        The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was up 0.09% at 85.63.
        Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com
        (END) Dow Jones Newswires

        May 20, 2015 01:58 ET (05:58 GMT)

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