Reuters: US Dollar Report: FOREX-Dollar rally continues on U.S. growth optimism

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FOREX-Dollar rally continues on U.S. growth optimism Mar 14th 2013, 13:56 Thu Mar 14, 2013 9:56am EDT * Dollar index hits 7-month peak; euro near 3-mth lows * Weak euro zone jobs data contrasts with strong U.S. data * Swiss franc, Norway crown fall after policy decisions By Wanfeng Zhou NEW YORK, March 14 (Reuters) - The dollar rose to a seven-month high against a basket of currencies and a three-month peak versus the euro on Thursday, buoyed by a string of U.S. data that lifted optimism about the world's largest economy. U.S. jobless claims unexpectedly fell in the latest week, while the current account deficit narrowed in the fourth quarter, government data showed on Thursday. Other reports over the past week highlighted improvement in the U.S. labor market and consumer spending. "The theme has been the stronger U.S. data and we're looking at continued upside surprises in the U.S. numbers," said Vassili Serebriakov, currency strategist at BNP Paribas in New York. "The dollar has been trading from a strong point and that should continue." An improving U.S. economic picture has revived talk that the Federal Reserve might pare back monetary easing measures towards the end of this year. Some analysts said rising 10-year U.S. Treasury yields could signal further dollar gains. The dollar index, which measures the value of the greenback versus a basket of currencies, rose 0.1 percent to 82.995 . It had earlier risen as high as 83.166 on Reuters data, the highest since Aug. 3. The euro fell 0.2 percent to $1.2937, having hit a session low of $1.2910, the weakest since Dec. 10. Euro zone employment fell 0.3 percent in the last three months of 2012, data showed on Thursday, intensifying concerns about the region's economic outlook. Other data on Wednesday showed a bigger-than-expected drop in euro zone factory output in January "Weak euro zone industrial production and employment data contrasts with stronger U.S. employment and retail sales figures which is driving interest rate expectations in favour of the dollar over the euro," said Adam Myers, senior currency strategist at Credit Agricole. Credit Agricole forecasts the euro to fall to $1.27 by the end of June, though Myers said there was a risk it could fall further. Demand from central banks to diversify their dollar holdings into euros could temper euro falls, however. Political uncertainty in Italy and a likely bailout for Cyprus also kept the euro under pressure. Investors also focused on a EU summit that will discuss budget policies, with signs that France, Spain and Portugal could be given more time to meet their deficit goals as long as they maintain a debt-cutting trend. The question of a bailout for Cyprus will be discussed on the sidelines of this week's EU and euro zone summits although it is not officially on the agenda of either meeting, a German official said on Wednesday. The dollar also rose to a six-month peaks against the Swiss franc and the Norwegian crown after central bank policy decisions and accompanying comments in Switzerland and Norway pushed those currencies lower. The Swiss franc fell to 0.9567 per dollar, its lowest since early September, after the Swiss National Bank it stood ready to take more monetary easing measures if needed. It also said the currency was still too high and that it would enforce the 1.20 franc per euro limit with "utmost determination". Norway's crown hit a low of 5.8250, also its strongest since early September after the Norges Bank said its key policy rate would be kept low for longer than market participants had expected. The dollar also firmed against the yen, which fell broadly after a short-lived reprieve earlier this week when some investors and speculators chose to take profits on the Japanese currency's persistent slide. The dollar was up 0.3 percent at 96.34 yen. Expectations of aggressive policy easing from the Bank of Japan are expected to underpin the dollar, with many traders looking for a retest of the 3 1/2-year high of 96.71 yen hit on Tuesday. The euro was up 0.1 percent at 124.69 yen but was still some way from the 34-month peak around 127.70 set last month. Link this Share this Digg this Email Reprints

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