Mixed US feelings as the dollar soars and confidence plummets
The dollar reached a four-month high as filings for US unemployment benefits hovered near the lowest level in four decades, boosting confidence in the economy.
The US currency climbed after the jobless claims supported sentiment that the upcoming July employment report will show strong growth and may clear the way for the Federal Reserve to boost interest rates next month.
"I'm a dollar bull," Pete Karabatos, a senior foreign- exchange trader at Silicon Valley Bank in California said. "All factors are still pointing toward strength in the US economy. We've got a Fed that's basically on the cusp of raising interest rates."
The Bloomberg Dollar Spot Index was little changed at 1,216.57, after touching the highest on a closing basis since March 13. The greenback was little changed at $1.0907 per euro and 124.76 yen.
Traders are pricing in a 48pc probability that the Fed will raise interest rates in September, based on the assumption that the effective fed funds rate will average 0.375pc after the first increase. That compares with 38pc on Monday.
The central bank has held its short-term target at virtually zero since December 2008 to support economic growth.
Jobless claims rose by 3,000 to 270,000 in the week ended August 1.
The next jobs report is projected to show employers, including government agencies, took on 225,000 workers last month, while the jobless rate held at a seven-year low of 5.3pc.
"It should be good news for the dollar" if the data meet expectations, said Stephen Casey, a New York-based senior foreign-exchange trader at Cambridge Global Payments.
However, consumer confidence declined for a fifth consecutive week as Americans grew less upbeat about their finances and whether it was a good time to shop.
The measure of household finances dropped to the weakest level since October and attitudes about the buying climate reached a seven-week low.
Scant signs of faster wage growth combined with less enthusiasm about shopping represent risks to consumer spending after a pickup in the second quarter.
Sentiment among lower-income individuals contrasted with those at the top end last week, the report showed. (Bloomberg)