The dollar advanced to a one-month high versus the euro and the yen as U.S. consumer confidence increased and crude oil prices dropped, reducing concern the economy may fall into a recession.
``The sentiment for the dollar is pretty positive,'' said Thomas Benfer, vice president of foreign exchange in New York at Bank of Montreal. ``Certainly the confidence number surprised the market. There may be light at the end of the tunnel.''
Sterling weakened 0.6 percent to $1.9813 after the Confederation of British Industry said its survey of 82 retailers showed 25 percent sold more goods than a year earlier and 61 percent sold fewer. The net rounded balance of minus 36 percentage points was the lowest since the survey began in 1983.
The yen declined earlier against the dollar after government reports showed Japan's unemployment rate rose in June to 4.1 percent, the highest level in almost two years, and household spending fell, adding to signs the economy's longest postwar expansion may be ending.
``At this stage, bad news in the U.S. will be translated to bad news elsewhere,'' said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``It provides some cushion to the dollar.''
The Dollar Index, which tracks the greenback against the currencies of six U.S. trading partners, reached as high as 73.322 today, the strongest since June 25. The Standard & Poor's 500 Index increased 1.2 percent.
Crude oil for September delivery dropped as much as 3.5 percent to $120.42 a barrel. The euro-dollar exchange rate and oil have moved in the same direction 90 percent of the time during the past year, according to Bloomberg calculations based on the correlation of their value changes.
The New York-based Conference Board's U.S. consumer confidence index rose this month to 51.9, higher than forecast, from a revised 51 in June, the lowest since February 1992.