Dollar Grinds Higher On U.S. Data

By James Ramage 

        The dollar pushed higher against the euro and the yen on Thursday after encouraging U.S. economic data moved investors to nudge forward their expectations for higher borrowing costs.
        The dollar gained 0.5% versus the common currency, as one euro bought $1.0932 in late-afternoon trade, on pace for its lowest close against the U.S. currency in a week. The dollar increased 0.2% against the yen to Yen124.15, heading for its strongest close since July 20.
        The Wall Street Journal Dollar Index, which measures the dollar against a basket of commonly traded currencies rose 0.3% to 88.71, its highest in four months.
        Currency traders and investors looked past a lower-than-expected number measuring overall U.S. growth from April through June to focus on stronger underlying data for consumer spending, the housing market, exports and inflation, as well as upward revisions to numbers for the first three months of 2015, said Brad Bechtel, managing director at Jefferies FX Group. They also noted that numbers for weekly jobless claims remained near four-decade lows, consistent with a strengthening labor market.
        The dollar continued to appreciate one day after the Federal Reserve's policy-making group signaled in its statement that the bar to meet conditions necessary for a September interest-rate increase was low. Thursday's U.S. data helped to reinforce such a timeline.
        "Markets still generally want to be long dollars," Mr. Bechtel said. "Going forward, the dollar should have a slow grind, but on trend, push a little higher."
        Money managers and traders have piled into the dollar in anticipation of the Fed increasing interest rates when central banks in the eurozone and Japan have been easing policy with measures that have weakened their respective currencies. Many analysts and investors still expect the Fed to raise short-term interest rates as early as September.
        Higher U.S. rates would make the dollar more attractive to yield-hungry investors.
        Now investors are shifting their attention to the jobs reports for July and August to see whether employment gains hold and wage growth continues to improve, said Elsa Lignos, senior currency strategist at RBC Capital Markets.
        "The last two days have not fundamentally changed the tone on the dollar, " Ms. Lignos said. "People are still waiting to see what the next few data releases will show before the Fed's September meeting."
        Thursday's numbers showed that U.S. gross domestic product grew at a 2.3% seasonally adjusted annual rate in the second quarter, the Commerce Department said. Economists had expected 2.7% growth. The Commerce Department also revised U.S. growth to 0.6% in the first quarter from a previously reported 0.2% contraction.
        In addition, initial jobless claims rose by 12,000 to a seasonally adjusted 267,000 in the week ended July 25, the Labor Department said, versus economists' expectations of 270,000. The numbers climbed from the previous week's unrevised 255,000 claims, the lowest since November 1973.
        Write to Jame Ramage at James.Ramage@wsj.com
        (END) Dow Jones Newswires
        July 30, 2015 16:42 ET (20:42 GMT)

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