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Tokyo - The dollar advanced before an economic report on Tuesday that analysts forecast will show resilience in the U.S. housing sector.
Bloomberg’s Dollar Spot Index rose for a third day. Economic data this week are forecast to show housing starts rose in June after contracting in May and continuing claims on unemployment benefits dropped in the week ended July 9, according to Bloomberg surveys of analysts.
The dollar’s gain helped to trim this year’s decline that was driven by investors paring expectations for interest-rate increases by the Federal Reserve.
The index, which tracks the currency against 10 major counterparts, has risen 2.5% since the UK voted to leave the European Union on June 23.
"We expect a stronger dollar as money flows into the US from Europe in the immediate future, due to political uncertainty here," said Neil Jones, the London-based head of hedge-fund sales at Mizuho Bank.
He sees US data "to continue improving, but not so much that the Fed has to raise rates. That’s a sweet spot for US stocks, which will attract capital flows."
Bloomberg’s dollar index rose 0.3% as of 7:19 a.m. in New York. The greenback strengthened 0.2% against the euro to $1.1054 and appreciated 0.6% to $1.3173 per pound.
New homes
New-home construction in the US rose 0.2% in June after contracting 0.3% in May, according to the median forecast of analysts. The data will be published today.
The Australian and New Zealand dollars dropped against their major peers as traders raised bets that both countries’ central banks will cut interest rates next month.
The Aussie fell 1.3% to 74.95 US cents, after climbing to 76.76 on July 15, the highest since May 3. The kiwi declined 1.2% to 70.33 cents, and earlier fell to 70.10, a level unseen since June 28.
Minutes from the Reserve Bank of Australia’s July meeting released on Tuesday showed policy makers kept their options open and reiterated that a higher currency may complicate adjustments in the economy.
The kiwi sank as the Reserve Bank of New Zealand moved to rein in a housing boom, paving the way for lower borrowing costs.
"The very tight timeline proposed for implementing the added restrictions reinforces the likelihood of the RBNZ cutting in August, especially following softer New Zealand second-quarter inflation," said Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia in Sydney.
"RBA July meeting minutes left the door open to more rate cuts, which is weighing on Aussie."
