Posted on Wednesday, 17th February 2010 by admin
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On Tuesday, the dollar fell versus rivals amid investor optimism about the global economy and signs the European debt crisis is easing.
What’s driving prices: The dollar was supported by improved U.S. economic data that boosted optimism about the recovery.
The National Association of Home Builders reported that housing starts jumped 2.8% in January to an annual rate of 591,000, which was more than expected.
Housing starts were expected to have reached an annual rate of 580,000 units in January, according to a Briefing.com consensus of economist forecasts.
Building permits, a measure of houses yet to be built, fell 4.9% to an annual rate of 691,000 units in January, which was better than expected. The rate of permits was expected to have slipped to 620,000 in January.
Separately, industrial production rose 0.9% in January after rising 0.7% in the previous month, the government reported Wednesday. Economists surveyed by Briefing.com thought it would rise 0.7%.
Traders also focused on minutes from the January meeting of the Federal Reserve. The minutes showed that the central bank now expects a slightly more robust economic recovery this year, even as unemployment remains elevated over the next few years.
“Overall, the minutes reveal that the Federal Reserve is growing more hawkish at a time when central banks in the Eurozone and the U.K. have to remain dovish because of inflation or fiscal concerns, which is why the dollar has performed so well today,” said Kathy Lein, director of currency research at trading firm GFT.
Meanwhile, the euro remained pressured by lingering concerns that the fiscal crisis in Greece will result in more economic pain across Europe.
What analysts are saying: “The absence of any concrete solutions to Greece’s immediate fiscal challenges is amid the high-profile dynamics weighing on the euro,” Ashraf Laidi, chief market strategist at CMC Markets in London, wrote in a note to clients.
“But improving U.S. data is increasingly playing an essential element in underpinning the dollar’s uptrend,” he added.
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