By MATTHEW WALTER And LAUREN DAVIDSON
The dollar rose slightly in New York trading Tuesday amid new signs the U.S. housing recovery is gaining steam, supporting the view that the economy is strong enough for the Federal Reserve to begin winding down its monetary stimulus later this year.
Sales of new homes rose to near a five-year high in May, and a widely watched gauge of house prices surged. Durable goods orders also rose more than expected in May, which may lead to more industrial output in the coming months, while a barometer of consumer confidence jumped to its highest level this month since January 2008.
"We had a bit of positive news economically, and [the market] is a bit more dollar bullish," said Bill Samela, co-head of global foreign exchange trading at BNY Mellon in New York.
The dollar was at ¥97.78 from ¥97.72 late Monday, according to EBS via CQG. Against the Swiss franc, the dollar was at CHF0.9373 from CHF0.9332.
The Wall Street Journal Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at about 74.332 from about 74.263.
The encouraging data bolstered expectations the Fed will begin winding down its $85 billion in monthly asset purchases this year. The policy, known as quantitative easing, is designed to keep interest rates low and support growth and employment. Fed Chairman Ben Bernanke last week laid out a tentative plan to begin to taper the program in the second half of 2013, as long as the economy continues to improve.
"What we have seen this week supports the notion of the improvement in the economy that the Fed deems sufficient to taper stimulus," said Vassili Serebriakov, currency strategist at BNP Paribas BNP.FR +1.42% in New York.
Even so, most major currencies held within their recent ranges, taking a breather from the volatile trading seen last week. Many emerging-market currencies that benefited for years from the Fed's loose monetary policy—as investors sold the dollar to seek higher yields abroad—came under pressure last week, falling to multiyear lows. Stocks and other high-yielding assets also slumped.
In response, two Fed officials on Monday made public statements suggesting the shift away from exceptionally loose monetary policy will be gradual, and that market fears may be overblown.
"The markets are still trying to figure out how to trade this," said Win Thin, a currency strategist at Brown Brothers Harriman in New York. "The Fed tried to play some damage control yesterday."
The euro was at $1.3093 from $1.3120. The common currency was at ¥128.07 from ¥128.22.
