MW: Dollar heads lower as pending home sales surge
The U.S. dollar fell Tuesday for a third day, extending a decline after a private report showed pending home sales jumped more than some anticipated in April.
The currency declined in earlier trading amid ongoing hopes that the worst of the global recession is over, reducing investor interest in the safe-haven status of the dollar.
$DXY 78.53, -0.64, -0.81%
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The dollar index (DXY 78.53, -0.64, -0.81%) , which measures the performance of the greenback against a basket of currencies, fell to 78.561, down from 79.062 in late North American trading Monday.
Pending sales of existing homes rose 6.7% in April after a 3.2% increase in March, the National Association of Realtors said. The index is up 3.2% since April 2008.
"The data should boost expectations for May existing home sales and support recent rotation into riskier assets," said analysts at Action Economics.
The Dow Jones Industrial Average (INDU 8,758, +36.38, +0.42%) improved after the data, and is flirting with turning positive for 2009.
The euro advanced to $1.4289 against the dollar, from $1.4170 on Monday.
The U.S. dollar and Japanese yen were under the most pressure as they had been the biggest beneficiaries of investors' flight to higher quality holdings in recent months. The lower-yielding yen has fallen more as risk appetites improve.
The dollar slipped to 96.01 yen, down from 96.46 yen.
The dollar came under broad selling pressure on Monday as equity and commodity markets surged. Those moves reflected rising appetite for risk on growing expectations the worst of the global recession has passed, analysts said.
They cautioned, however, that markets may be getting ahead of the game, leaving room for a near-term reversal of recent moves in the currency markets.
"We are less optimistic at this stage and suggest taking some profit from pro-risk trades," wrote strategists at BNP Paribas.
Analysts said remarks by U.S. Treasury Secretary Timothy Geithner in Beijing helped support the dollar, prompting some modest short covering. See more on China.
Geithner said he believes the Chinese expect the dollar to remain the world's principal reserve currency, "for a long period of time, as do we," according to news reports.
Oil futures edged lower, while gold futures rose slightly.
In the euro zone, the statistics agency Eurostat said the unemployment rate rose to 9.2% in April from 8.9% in March, the highest level since 1999.
British pound, data
The British pound turned higher after the U.S. data, reaching the highest since October. Read about sterling's recent rally.
The British pound rose to $1.6547 versus the greenback from $1.6444 Monday.
The Bank of England on Tuesday said mortgage approvals rose to 43,200 in April from 40,000 in March, beating expectations for a rise to 41,000.
"These signs of improvement pose nowhere near enough reason for the Bank of England's Monetary Policy Committee to consider raising the bank rate in the short term," wrote Charles Davis, economist at the Center for Economic and Business Research.
The bank rate is likely to remain at 0.5% until at least spring 2010, he said. The bank's Monetary Policy Committee concludes its monthly policy meeting Thursday and is widely expected to leave its key rate unchanged and maintain its 125 billion pound quantitative-easing program.
