BLBG: Dollar Climbs to 3-Week High After Housing Starts Top Forecast
Greenback rises for third day as Aussie drops on rate outlook
Construction gauge rose in June after contracting prior month
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The dollar advanced to a three-week high after a report showed June housing starts rose more than forecast.
The greenback’s gain helped to trim this year’s decline that was driven by investors paring expectations for interest-rate increases by the Federal Reserve. The index, which tracks the currency against 10 major counterparts, has risen about 2.5 percent since the U.K. voted to leave the European Union on June 23.
“We expect a stronger dollar as money flows into the U.S. from Europe in the immediate future, due to political uncertainty here,” said Neil Jones, the London-based head of hedge-fund sales at Mizuho Bank Ltd. He sees U.S. data “to continue improving, but not so much that the Fed has to raise rates. That’s a sweet spot for U.S. stocks, which will attract capital flows.”
Bloomberg’s dollar index rose 0.5 percent as of 8:34 a.m. in New York. The greenback strengthened 0.4 percent against the euro to $1.1029.
The Australian and New Zealand dollars dropped against their major peers as traders raised bets that both countries’ central banks will cut interest rates next month. The Aussie fell 1.3 percent to 74.95 U.S. cents, after climbing to 76.76 on July 15, the highest since May 3. The kiwi declined 1.2 percent to 70.33 cents, and earlier fell to 70.10, a level unseen since June 28.
Minutes from the Reserve Bank of Australia’s July meeting released Tuesday showed policy makers kept their options open and reiterated that a higher currency may complicate adjustments in the economy. The kiwi sank as the Reserve Bank of New Zealand moved to rein in a housing boom, paving the way for lower borrowing costs.
“The very tight timeline proposed for implementing the added restrictions reinforces the likelihood of the RBNZ cutting in August, especially following softer New Zealand second-quarter inflation,” said Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia in Sydney. “RBA July meeting minutes left the door open to more rate cuts, which is weighing on Aussie.”
