U.S. dollar rises to a six-month high versus euro on weak eurozone data - Aug 26

Earlier in the day, the single currency tumbled versus the dollar, following the weak eurozone data released from German, which showed that ifo’s institution business climate index in August fell more than expected to a three-year low of 94.8 with gross domestic product shrank in the second quarter for the first time since 2004 to minus 0.5 percent, while consumer sentiment also hit a five-year low at 1.5. The euro fell against the dollar to a six-month low at 1.4570 before rebound on the back of rising oil prices, traded at 1.4656 at New York closing. The crude oil for October delivery rose $1.22 per barrel after initial drop to $112.36 and ended at $116.33.

In contrast, U.S. economic data was less bleak. U.S. Consumer confidence rose in August to 56.9 from previous month of 51.9, while the sales of newly constructed U.S. single-family homes in July posted a 2.4 percent increased from an almost 17-year low in June. The reports fueled further dollar buying and the dollar index climbed to a 2008 high of 77.619, ended up 0.6 percent at 77.229. The U.S. currency also rose against the Swiss francs to a session high of 1.1087 as other currencies tracked the euro lower. The British pound fell a more than two-year low against the dollar to 1.8330 before rebound and was last trading at 1.8401, down 0.8 percent from late Monday.

Against the Japanese yen, the dollar was up 0.3 percent at 109.61 at New York closing while euro also rebounded from its session low of 159.92 and ended at 160.60.

Ongoing worries that other countries are vulnerable to U.S. economic weakness and jitters about the health of the financial services industry prompted investors to unwind trades where they use low-yielding currencies to fund purchases of these assets. That pushed the Australian dollar to an 11-month low of 0.8493, before trading back up to 0.8550, down 0.9 percent on the day. The New Zealand dollar also came under pressure on Monday after posting its highest monthly trade deficit in 11 months in July, it fell to 0.6898 versus the U.S. currency, near to a one-year low of 0.6818 hit earlier in the month and last traded at 0.6975.

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Currency investors took little notice of the Federal Reserve's minutes of its last meeting, which earlier this month saw a weakening economic outlook and financial market stress. The Fed said the outlook supported the case for steady U.S. interest rates despite persistent inflation concerns.

On Wednesday, economic data release includes German import price index, CPI preliminary and HICP preliminary, and U.S. durable goods and Midwest manufacturing.