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Dollar Rises versus Euro on U.S. Recovery Prospects, Draghi - (Reuters)

Posted by Chris Advincula on Jun 26, 2013 7:18:00 AM

June 26 Wednesday 11:20 GMT

* Strong U.S. data lifts dollar to 3-week high versus euro

* Dovish comments from ECB's Draghi also weigh on euro

* Dollar falls versus safe-haven yen on China concerns

By Jessica Mortimer

LONDON, June 26 (Reuters) - The dollar hit a three-week high against the euro on Wednesday, extending gains made the previous day after U.S. data pointed to a solid economic recovery.

The euro was down 0.1 percent at $1.3069, having dropped to $1.3055, its lowest since June 5. Technical analysts said a daily close below its 200-day moving average at $1.3073 could trigger more falls towards $1.30.

Data on Tuesday showing big gains in U.S. business spending plans and in house prices lifted the dollar, which was also boosted by expectations that the Federal Reserve will before long begin to scale back monetary stimulus.

By contrast, European Central Bank President Mario Draghi said on Tuesday that the ECB was nowhere near exiting its accommodative monetary policy.

"Euro/dollar is heavy, but I'm surprised it's not lower after the very good U.S. numbers and the rather dovish comments from Draghi," said Niels Christensen, currency strategist at Nordea in Copenhagen.

He added investors would "need more confirmation of the growth momentum in the U.S." for the euro to start falling towards the early May and early April lows just below $1.28.

The dollar was steady against a basket of currencies at 82.598, just below Monday's three-week high of 82.814.

But it fell 0.25 percent to 97.55 yen as worries about a cash crunch in China supported safe-haven flows into the Japanese currency and pushed Japanese shares lower.

"Dollar/yen is bucking that dollar-rally trend, as Asian stock markets have not fully benefited," as they remain focused on the potential credit crunch in China, said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong.

Traders will watch a string of Fed speakers later in the day to gauge their stance on how quickly monetary easing will be scaled back.

The higher-yielding Australian dollar rose 0.4 percent to $0.9294, lifting off Monday's 33-month low of $0.9148, helped by assurances from China's central bank that it would provide cash to institutions that need it.

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Chart: WorldWideMarkets Flash Trader

Topics: EURUSD, EURO, Fundamental Analysis. European Session, forex trading


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