The greenback continued to display strength against other major currencies on Tuesday, supported by year-end unwinding of short positions in the dollar and expectations of a stronger growth outlook for the world's largest economy. The prospect of low U.S. interest rates has weighed on the dollar this year, increasing its attractiveness as a funding currency to buy assets with higher returns but improving U.S. data has led some to review when they think the Federal Reserve might start to tighten monetary policy.
U.S. final GDP for the 3rd quarter was revised down to 0.4% from 0.5%, suggesting the U.S. economy grew at a slower pace than initially thought. The single currency rebounded from Asian low of 1.4265 to 1.4333 after the data, however, renewed selling interest pushed the euro back down and hit an intra-day low of 1.4218 later in NY before a rebound was seen due to profit-taking.
U.K. final GDP came in at -0.2% q/q, slightly weaker than economists' forecast of 0.1% q/q n 5.1% y/y drop. Despite a brief rise to 1.6100 in Asia, traders dumped the cable after the data on active cross selling in sterling and the British pound eventually tumbled to a 2-month low of 1.6023 later in NY before stabilizing.
Despite a brief retreat to 91.00 in early Asia, the greenback maintained a firm undertone against the yen on dollar's broad-based strength due to the firmness in global stock markets on Tuesday (Dow and S&P closed the day up 50 points and 3.9 points respectively). Usd/jpy hit another one-month high at 91.88 in NY afternoon. In other news, U.S. home sales in October rose by 7.4% to 6.54 million, much higher than expected.
Data to be released on Wednesday include New Zealand GDP, Eurozone industrial order, Canada GDP, US personal income, PCE core, PCE index, U. Michigan survey, new home sales. Wednesday is a market holiday in Japan.