Dollar gains on U.S. housing data, sees Fed tapering soon

Dollar gains on U.S. housing data, sees Fed tapering soon

Investing.com – The dollar moved higher in U.S. trading on Tuesday after investors looked beyond a Federal Reserve decision to keep stimulus programs unchanged last week and prepared for such dollar-weakening policies to unwind in either in late October or in December.

In U.S. trading on Tuesday, EUR/USD was down 0.12% at 1.3478.

The dollar took a hit last week after the Federal Reserve left its USD85 billion bond-buying program unchanged — many investors were expecting the U.S. central bank to trim the total by USD10 billion or more.

Asset purchases aim to spur recovery by driving down interest rates, weakening the dollar in the process.

Afterwards, conflicting statements from monetary officials have made it unclear when the Fed will begin scaling back its bond-buying program sooner or later.

On Friday, St. Louis Fed President James Bullard said the Fed could decide at its October monetary policy meeting to begin tapering the USD85 billion monthly asset-purchasing program.

The Federal Reserve will hold its next monetary policy meeting Oct. 29-30 but is not scheduled to hold a press conference that day, which left many expecting a decision to taper asset purchases to come in December before Bullard's comments.

On Monday, however, Federal Reserve Bank of New York President William Dudley said monetary authorities want to be sure recovery is sustained before dismantling stimulus programs.

Separately, Dallas Fed President Richard Fisher, a noted policy hawk, said on Monday the decision to keep the Fed's bond-buying program unchanged has damaged the institution's credibility.

The dollar look past those comments and saw only slight headwinds after soft consumer sentiment data hit the wire earlier Tuesday.

The Conference Board's index of U.S. consumer confidence ticked down to 79.7 in September from 81.8 in August.�

Analysts were expecting the figure to dip to 79.9.

Improving housing data supported the greenback somewhat by fueling an underlying consensus that tapering will begin this year.

The S&P/Case-Shiller index of property values in 20 U.S. cities increased by 12.4% on year in July, in line with already bullish market expectations.
Meanwhile in Europe, data revealed that German business confidence improved in September though not in line with expectations, which softened the euro and bolstered the dollar's safe-haven appeal.

The German Ifo business climate index ticked up to 107.7 from 107.6 in August, the highest level since March 2012 though still below expectations for a reading of 108.2.

The single currency also remained under pressure after European Central Bank President Mario Draghi said Monday the bank is ready to inject a third round of liquidity into the region's banks if needed, in order to safeguard the bloc's recovery.

The greenback was up against the pound, with GBP/USD down 0.22% at 1.6009.

The dollar was down slightly against the yen, with USD/JPY down 0.02% at 98.84, and up against the Swiss franc, with USD/CHF trading up 0.17% at 0.9124.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.14% at 1.0298, AUD/USD down 0.38% at 0.9395 and NZD/USD trading down 1.09% at 0.8282.

Statistics Canada reported earlier that retail sales rose 0.6% in July from June, below forecasts for a 1.0% gain. Core retail sales were up 1.0%, in line with forecasts.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.11% at 80.67.

On Wednesday, the U.S. is to release data on durable goods orders, a leading indicator of production, in addition to a report on new home sales.