Dollar strengthens vs. euro as spending rises after Fed taper

The dollar strengthened a fifth day versus the euro as U.S. consumer spending rose the most in three years a day after the Federal Reserve scaled back bond purchases that weaken the greenback and support global asset prices.

Hungary’s forint dropped as emerging-market peers the South Africa rand and Brazil real rebounded from a week-long rout. The 18-nation shared currency fell as German inflation unexpectedly stayed unchanged in January, signaling subdued price pressure in the euro-area’s largest economy.

“The selloff in emerging markets is encouraging money to divest into developed markets, where the dollar is a beneficiary of that,” Brian Daingerfield, a Stamford, Connecticut-based currency strategist at Royal Bank of Scotland Group Plc, said in a phone interview. “What’s going on in EM is certainly the larger driver of foreign exchange markets right now.”

The dollar strengthened 0.8% to $1.3551 per euro at 3:42 p.m. New York time to extend its longest rally since Nov. 1. The U.S. currency gained 0.4% to 102.72 yen, while the euro slipped 0.4% to 139.21 yen.

The Bloomberg Dollar Spot Index, which monitors the greenback against 10 major counterparts, rose 0.4% to 1,030.60 after touching 1,025.05 yesterday, the lowest level since Jan. 14.

Forint, Rand

The Hungarian forint fell a second day after Gyula Pleschinger, a member of the central bank’s Monetary Council, said yesterday that the currency has depreciated “too fast, too big” and that the central bank is monitoring its move and the market environment.

The forint depreciated 0.8% to 228.13 per dollar after dropping as much as 1.6% to 229.97, its weakest level since Sept. 6.

The rand was the best performer among 174 global currencies versus the dollar after the Ghana cedi and Malawian kwacha as the South Africa Reserve Bank unexpectedly increased its benchmark interest rate yesterday. That followed central banks from Turkey to Brazil that have tightened monetary policy.

The currency gained 1.3% to 11.1742 per dollar after earlier falling 0.7% to 11.3909, the weakest since October 2008. The rand slumped 2.5% yesterday.

“If there aren’t fundamental changes and policy changes that are necessary to come in behind” these rate hikes, they “really do nothing,” Robert Sinche, a global strategist at Pierpont Securities Holdings LLC in Stamford, Connecticut, said in an interview on Bloomberg Television’s “Surveillance” with Tom Keene.

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