LONDON (MarketWatch) - The U.S. dollar was higher versus most rivals Thursday as markets awaited further data on the U.S. housing market and weighed the impact of the recent rise in government-bond yields.
The dollar index (DXY 80.76, +0.43, +0.53%) , a measure of the greenback against a trade-weighted basket of six major currencies, traded at 80.762, up from 80.413 in North American trade late Wednesday.
DXY 80.76, +0.43, +0.53%
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Overall volume remained muted, with traders awaiting the release of new U.S. home-sales data for April at 10 a.m. Eastern, said Joshua Raymond, market strategist at City Index.
A further sign of stabilization in the U.S. housing market, following modestly encouraging readings on existing home sales, could provide renewed support for U.S. stock markets, which could translate into weakness for the U.S. dollar, Raymond said.
The dollar fell sharply in May before stabilizing this week. The greenback has been pressed down by rising equity markets and expectations that the worst of the global recession will soon be over. Rising sentiment has dented demand for the dollar as a safe-haven currency.
Rising U.S. government-bond yields helped stem the dollar's fall this week, some analysts said.
The U.S. 10-year Treasury yield jumped to 3.72% on Wednesday, a gain of 17 basis points, or 0.17 percentage point, and the highest level since mid-November. In recent action, the 10-year yield was down 4 basis points at 3.68%.
"The rise in U.S. yields is potentially reinforcing interest-rate support for the currency but may also reinforce anxieties over funding for the huge budget deficit," said strategists at Standard Chartered Bank, in a research note.
A stalled stock-market rally and worries that rising yields could damp a nascent recovery are also a factor, said analysts at Lloyds TSB.
"The S&P 500's close below 900 for a third time in four sessions won't do confidence any good that the index can stretch the gains accumulated since March," they said. "The surge in U.S. 10-year yields ... already seems to be weighing on mortgage activity and could cause economic pessimism to return."
The dollar jumped to 96.88 yen versus the Japanese currency from 95.18 yen late Wednesday. The euro rose 1.4% versus the Japanese unit to 134.62 yen.
"The yen suffered a further sell-off overnight against all its major counterparts as figures showing the outflow of funds from Japanese investors to foreign debt reinforced the sense that the haven-buying of the yen is diminishing amid declining tensions in global markets," wrote strategists at Brown Brothers Harriman.
The euro traded at $1.3889 versus the dollar, down from $1.3908 late Wednesday but off lows scored in Asian trade.
The European Commission's gauge of economic sentiment across the 16-nation euro zone posted a stronger-than-expected rise in May. The economic-sentiment indicator rose to 69.3 from a reading of 67.2 in April, just exceeding forecasts for a rise to 69.2.
The rise marked the second consecutive monthly rise for the index, albeit from historically low levels. The E.C.'s retail-confidence index led the improvement, rising 5 points, while the consumer-confidence index remained unchanged.
"Though consumer confidence in the euro area did not rise again as expected, the general level of economic sentiment is on the upswing. This follows similar recent patterns in the U.K. and U.S.," wrote Arek Ohanissian, an economist at the Center for Economic and Business Research.
"Though contraction will continue and unemployment will rise even beyond that, the signs that sentiment is turning are beginning to come from various directions," Ohanissian said.
Meanwhile, German unemployment showed a much smaller-than-expected rise in May, but the figure was muted by changes in how statisticians compile jobless data in Europe's biggest economy. See full story.
