The US dollar rose against sterling and yen after a survey showed sales of existing US homes last month at a two-year high, providing evidence the housing market is on the mend. Purchases jumped 9.4 percent to a 5.57 million annual rate, more than forecast and following a 5.09 rate in August. The greenback rallied against sterling mostly on disappointing UK data showing the UK economy is still mired in recession. The US dollar had been sliding across the board all week on expectations that US interest rates will remain low for some time.
The euro also vaulted higher against the US dollar and pound on generally upbeat euro- zone data, underlining expectations of a recovery in the third quarter and kept it near a 14-month peak above $1.50. The single currency drew support from the Ifo index of German business morale that showed the bloc's economic recovery to be generally on track.
Sterling extended its sharp fall in the wake of data showing UK unexpectedly contracted in the third quarter, dropping below a key technical support level against the US dollar. The pound has been under heavy pressure since data showed UK GDP fell by 0.4 percent between July and September, way below analysts' expectations of a 0.2 percent rise.
The Japanese yen slid to a one-month low against the US dollar as the spread between 10-year US and Japanese government bond yields widened to 210 basis points in favor of the greenback. That makes US bonds more attractive to Japanese investors. The yen also suffered after Japan's finance minister said the country needed a second extra budget worth around 10 trillion yen, feeding expectations that government debt would rise and privatization would be revised.
The Canadian dollar weakened for a second day after Bank of Canada Governor Mark Carney warned about the currency's excessive strength, prompting investors to look elsewhere for higher yield. Canada's dollar had strengthened 19 percent this year through Oct. 19, the day before the central bank left interest rates at a record low and stepped up its warnings about the risk to the nation's recovery that a stronger currency poses.
The Australian dollar inched up against the US dollar, although the rally which took it to 14-month highs earlier this week was showing signs of tiring as investors reassessed extended long positions on the Aussie. The Australian currency has risen nearly 1.5 percent this week and remains one of the best performing currencies. The New Zealand dollar drifted higher in range-trading against the US dollar as currency markets sought direction and local investors turned their attention to an interest rate review next week.
10-Year Treasury Note Yield: 3.462%
Dow Jones Industrial Average: 9,981.93 + 99.08