The dollar hovered above fresh lows for the year this morning after US pending home sales posted their third straight monthly rise, fuelling optimism about the economy and reducing safe-haven demand for the greenback.
Higher-risk currencies such as the New Zealand dollar lost a bit of steam after hitting multi-month highs against the US dollar the previous day, propelled by the generally bullish tone in equity and commodity markets such as oil.
But the Australian dollar set fresh eight-month highs against the dollar and yen after data showed the economy managed to avoid recession in the first quarter of the year and grew more than expected.
US pending home sales posted their biggest jump in 7-½ years in April, suggesting the US housing market, which is key to an economic revival, is on the mend and reinforcing optimism about a global economic recovery.
Federal Reserve Chairman Ben Bernanke testifies before the House of Representatives Budget Committee at 3pm and the market is waiting for clues on whether the Fed will increase or speed up purchases of longer-dated Treasuries to keep down interest rates.
The benchmark 10-year Treasury note yield has risen about 100 basis points to 3.61 percent since the Fed said in March it would buy longer-dated paper, and analysts say a yield of 3.5-4 percent would eventually lead to higher mortgage rates.
The dollar index was flat at 78.504 after falling to 78.334 yesterday, its weakest level since mid-December. The euro was steady at $1.4297 after hitting a 2009 high of $1.4332 on electronic trading platform EBS.
The dollar dipped 0.1 percent to 95.70 yen on EBS, after falling to 95.38 yen earlier.
“Generally speaking it's also hard to think the dollar will strengthen going forward considering the eventual fallout of GM's bankruptcy on the real economy and the mounting (US) budget deficits,” said Shinichi Hayashi, a currency trader for Shinkin Central Bank.
Reuters