A dollar gauge rose to a four-year high amid bets the Federal Reserve will boost interest rates before its peers. New Zealand’s currency slid to a year-low as the nation’s central bank signaled possible intervention.
The greenback remained higher after reports showed claims for jobless benefits in the U.S. rose last week and durable- goods orders dropped in August. It reached the strongest since November 2012 versus the euro before U.S. data tomorrow analysts said will show economic growth quickened and consumer confidence improved. The New Zealand dollar slid versus all of its 31 major peers after Reserve Bank Governor Graeme Wheeler called the currency’s level “unjustified.”
“The broad picture is monetary-policy divergence,” said Adam Cole, the head of global foreign-exchange strategy at Royal Bank of Canada in London. “As the first Fed move gets closer, it gets more important. With the RBNZ, it’s perhaps an opportunistic move on their part to put out the statement on currency valuation and risk of intervention when they were pushing in the same direction the market was moving anyway.”
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 of its major peers, climbed 0.5 percent to 1,064.62 at 8:32 a.m. New York time, set for the highest close since June 2010.
The dollar gained 0.5 percent to $1.2714 per euro and touched $1.2697, the strongest since Nov. 16, 2012. The U.S. currency rose 0.3 percent to 109.31 yen. It reached 109.46 yen on Sept. 19, the most since Aug. 2008.
The U.S. currency will trade around current levels versus the euro for the rest of this year, RBC’s Cole said.
The kiwi tumbled 1.8 percent to 79.36 U.S. cents and touched 79.34 cents, the weakest since Sept. 6, 2013. It has declined 4.9 percent this month.
“Unjustified and unsustainable are important considerations in assessing whether exchange-rate intervention is feasible,” Wheeler said in an unscheduled statement. “Another consideration is whether conditions in the foreign- exchange markets are conducive to intervention having an impact on the exchange rate.”
Wheeler said July 24 the RBNZ would pause in its rate- tightening cycle after four increases this year. He has been trying to talk the currency down, saying it hasn’t reflected a plunge in commodity prices.
“The RBNZ Governor’s comment on the ‘unjustified and unsustainable’ exchange rate is another example of jaw-boning,” said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney. It would be an opportune time for the central bank to intervene in currency markets early on Oct. 6, an Australian public holiday, when thin liquidity would amplify the impact, Capurso said.
Australia’s dollar dropped 0.8 percent to 88.14 U.S. cents and touched 87.92 cents, the lowest since Feb. 4.
The U.S. dollar rose before reports tomorrow that analysts said will show the world’s biggest economy is gaining momentum.
Gross domestic product grew 4.6 percent in the second quarter, more than the previous estimate of 4.2 percent released Aug. 28, according to a Bloomberg survey of analysts before the Commerce Department report. The Thomson Reuters/University of Michigan consumer sentiment index rose to 84.8 this month, the highest in more than a year, a separate Bloomberg survey showed.
Traders see a 78 percent chance the Fed will raise its benchmark target rate by September 2015, according to data compiled by Bloomberg based on federal funds futures. That’s up from a probability of 73 percent on Sept. 1.
The dollar has strengthened 6.1 percent in the past three months, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro dropped 1.7 percent and yen weakened 1.8 percent.
“The theme during the second half of this year is dollar strength,” Yannick Naud, a money manager at Sturgeon Capital Ltd. in London, said in an interview on Bloomberg Television’s “On The Move” with Jonathan Ferro. “The economy is growing very strongly. The increase of interest rates will be quicker than expected.”
The euro slid after the Ifo institute yesterday published its German business climate index, based on a survey of 7,000 executives. Confidence dropped to 104.7, the lowest since April 2013, from 106.3 in August.
“Just looking at the gap between European and U.S. business confidence, it’s clear the euro should be falling and the dollar rising,” said Yasuhiro Kaizaki, vice president for global markets at Sumitomo Mitsui Trust Bank Ltd. in New York. “The long-term trend for euro weakness isn’t going to change.”