The dollar advanced against other G7 currencies as reports showed increase in U.S. consumer confidence and home prices, encouraging speculation the Federal Reserve will proceed in withdrawing its stimulus measures.
U.S. consumer confidence came in greater-than-expected at 52.9 with consensus forecast at 52.5.
Futures trading in Chicago showed a 60 percent chance that the Fed will raise its zero to 0.25 percent target lending rate by at least a quarter-percentage point by its June 2010 meeting, up from 48 percent odds a week ago.
Ealier, the single currency found buying interest in Asian morning at 1.4354 and price rebounded. With Asian and European stocks advanced, euro later rallied to intra-day high at 1.4459 in Europe. However, better-than-expected U.S. consumer confidence heightened expectation of a rate hike by the Fed and the greenback rebounded strongly after the data. Euro then tumbled to intra-day low of 1.4350 in NY afternoon before stabilizing.
Cable started off the day trading sideways with no major data coming out of U.K. on Tuesday. Despite a brief rally to intra-day high at 1.6070 after triggering stops in European morning, the British pound quickly fell from there. Price later nose-dived after the release of U.S. consumer confidence data and hit an intra-day low of 1.5867 in NY afternoon before a minor rebound took place.
Versus the Japanese yen, the greenback continued to trade with a firm bias due to year-end demand for usd as well as the attraction of yen carry trades caused by the continued widening of rate differential between U.S. 10-year T-note and JGB (spread hit a 2-year high of 255 b.p. and 30-year T-bond futures briefly broke 114.28 support yesterday). Despite a brief dip to intra-day low of 91.52 in European morning, the pair swiftly rebounded from there and eventually breaking resistance 91.88 to 92.08 in NY afternoon before stabilizing.
Data to be released on Wednesday include Japan manufacturing PMI, Swiss KOF indicator and U.S. Chicago PMI