Dollar Extends Gain After U.S. Data

09:49, 19th August 2014

(RTTNews) - The U.S. dollar continued its early rally against its key counterparts on Tuesday, after data showed that U.S. consumer price inflation remain contained and housing starts rose to an 8-month high in July.

The data from the Commerce Department showed that U.S. housing starts in July rose to their highest level since November last year.

The housing starts jumped 15.7 percent to an annual rate of 1.093 million in July after falling 4 percent to a revised 945,000 in June.

Economists had been expecting housing starts to climb to a rate of 963,000 from the 893,000 originally reported for the previous month.

Consumer prices saw only a modest increase in the month of July, according to a report released by the Labor Department, with higher prices for shelter and food offset by decreases in prices for energy and airline fares.

The CPI ticked up by 0.1 percent in July after rising by 0.3 percent in June. The modest increase by the index matched economist estimates.

Excluding food and energy prices, the core consumer price index also inched up by 0.1 percent in July, matching the increase seen in the previous month. Economists had been expecting the core index to edge up by 0.2 percent.

Investors keenly await Wednesday's release of minutes from the Federal Reserve's July policy meeting as well as comments from the Fed's summit in Jackson Hole, Wyoming, starting on Thursday for any clues on the timing of interest rate rises as the central bank is considering to normalise its monetary policy.

The greenback appreciated to a 2-week high of 102.78 against the yen, up from Monday's closing quote of 102.56. The greenback is likely to challenge resistance around the 103.5 zone.

Japan's leading index rose more than initially estimated in June, final data from the Cabinet Office showed.

The leading index rose to 105.9 in June, which was revised up from 105.5. That followed by a 104.8 score in May.

The greenback advanced to 0.9086 against the Swiss franc, a 6-day high, from an early low of 0.9058. Further bullish trend may push the dollar up to a resistance around the 0.915 mark.

The greenback strengthened to 1.3318 against the euro, a level not touched since November 4, 2013. Next key resistance for the greenback may be eyed around the 1.32 level. The pair was worth 1.3362 when it closed deals yesterday.

The euro area current account surplus declined further in June as the shortfall on current transfers widened notably from May, the European Central Bank said.

The current account surplus fell to a seasonally adjusted EUR 13.1 billion in June from EUR 19.8 billion in May.

Reversing from an early low of 1.6728 against the pound, the greenback spiked up to a 4-1/2-month high of 1.6622 when the data came out. If the greenback continues its uptrend, 1.65 seen as its next possible resistance level.

U.K. inflation slowed more than expected in July largely due to a fall in clothing prices and factory gate prices declined unexpectedly from last year, data showed.

Inflation eased to 1.6 percent in July from 1.9 percent in June, the Office for National Statistics reported. Inflation was forecast to slow to 1.8 percent.