Dollar Advances as Paulson Stresses Support for U.S. Currency
Dollar Advances as Paulson Stresses Support for
July 22 (Bloomberg) -- The dollar rose the most against the euro in almost a week as Treasury Secretary Henry Paulson voiced support for the currency and the Federal Reserve Bank of
The greenback extended its gain after breaking $1.59, where orders to sell the euro were clustered, and increased further as crude oil prices fell, traders said. The Canadian dollar dropped against all of the other major currencies as a report showed domestic retail sales rose in May less than economists forecast.
``The feeling is that we're at a turning point and things are going to get better from here in the financial sector,'' said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. Paulson's comments ``helped the market get over the mass hysteria about Fannie and Freddie.''
The dollar increased 0.4 percent to $1.5851 per euro at 10:28 a.m. in
Canadian Dollar
The U.S. dollar strengthened today as Paulson said in a speech in
The dollar touched the record low earlier this month on concern Fannie and Freddie, which own or guarantee almost half of the $12 trillion in
Plosser on Rates
Philadelphia Fed President Charles Plosser said in a speech today in King of Prussia, Pennsylvania, that the U.S. central bank should raise interest rates ``sooner rather than later.'' He argued against reductions in two Fed decisions this year.
Two-year U.S. Treasury yields rose 7 basis points, or 0.07 percentage point, to 2.66 percent. The yield advantage of comparable-maturity German bunds narrowed to 191 basis points.
``Plosser's hawkish comments pushed Treasury yields higher,'' contributing to the dollar's turnaround, said Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York.
Futures traded on the Chicago Board of Trade showed a 7 percent chance the Fed will increase its 2 percent target rate for overnight lending between banks by a quarter-percentage point at its Aug. 5 meeting, compared with 40 percent odds a month ago.
The euro traded earlier near an all-time high versus the dollar as the Italian daily La Stampa reported that European Central Bank executive board member Lorenzo Bini Smaghi said the bank's main refinancing rate isn't ``exactly restrictive'' at 4.25 percent.
`Hawkish Noises'
``The ECB has continued to make hawkish noises, meaning the euro is going to be quite well-supported in the near term,'' said Ian Stannard, a London-based senior currency strategist at BNP Paribas SA. The dollar may still rebound to $1.50 by the end of the quarter, he said.
The euro may climb past 170 to an all-time high against the yen as the ECB raises rates a second time this year while the Bank of Japan leaves its benchmark rate unchanged at 0.5 percent, according to Commerzbank AG.
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