The dollar rose the most in three weeks against the euro as the U.S.
government said the economy grew at a faster pace than initially
estimated last quarter.
The U.S. economy expanded at a 0.9 percent annual pace last quarter,
faster than the Commerce Department's April 30 estimate of 0.6 percent,
the government said. U.S. durable goods orders excluding transportation
equipment rose 2.5 percent in April, the government said yesterday. The
median forecast in a Bloomberg survey was for a 0.5 percent drop.
The U.S. currency also gained a fourth straight day against the yen
after Federal Reserve Bank of Dallas President Richard Fisher said
yesterday the central bank will raise interest rates should consumers
expect faster inflation. The Canadian dollar gained after a report
showed Canada's current-account surplus in the first quarter was almost
double the forecast.
``U.S. data is not turning out as weak as the market anticipated and
that's giving the dollar a bounce,'' said Shaun Osborne, chief currency
strategist at TD Securities Inc. in Toronto. ``On top of that you had
very hawkish comments from the Fed.''
Futures on the Chicago Board of Trade show a 39 percent chance the Fed
will raise its target rate by a quarter- percentage point to 2.25
percent on Sept. 16, up from 29 percent yesterday. The central bank has
cut rates seven times since September. Japan's benchmark rate is 0.5
percent and the euro region's is 4 percent.
Should ``inflation expectations continue to worsen, I would expect a
change of course in monetary policy to occur sooner rather than
later,'' Fisher said in a speech in San Francisco. ``I don't know a
single person on the committee that isn't concerned about inflation.''
Higher oil prices will stoke inflation in the U.S. to an average of 4.5
percent this year, according to David Rosenberg, chief North America
economist at Merrill Lynch & Co. in New York. Consumer prices rose
3.9 percent in the year through April, according to the Labor
Department.
``The market has to re-price the Fed removing accommodation quicker
than expected on the back of rising inflation concerns,'' said Matthew
Kassel, director of proprietary trading at ING Financial Markets LLC in
New York. ``Yields are up and that's driving the dollar.''