US dollar touches three-week high, lifted by recent data, Fed taper view

New York

THE US dollar scaled three-week peaks on Friday, supported by better-than-forecast US retail sales data released on Thursday that backed expectations for a reduction of asset purchases by the Federal Reserve before the end of the year.

The dollar index rose to 93.220, the highest since the third week of August. It was last up 0.4 per cent at 93.207.

For the week, the dollar index gained 0.6 per cent, its largest weekly percentage rise since mid-August.

The Fed holds a two-day monetary policy meeting this week and is expected to open discussions on reducing its monthly bond purchases, while tying any actual change to US job growth in September and beyond.

Speculation about a Fed taper this year gathered pace after US retail sales unexpectedly increased in August, data showed on Thursday, rising 0.7 per cent from the previous month despite expectations of a 0.8 per cent fall. A business sentiment survey also showed a big improvement.

Currency markets were generally quiet on Friday with traders reluctant to take on new positions ahead of a clutch of important central bank meetings this week including the Fed, the Bank of Japan and the Bank of England.

The dollar was up 0.5 per cent against the Swiss franc at 0.9320 francs, after earlier hitting a five-month high of 0.9324 francs.

The greenback rose 0.2 per cent to 109.92 yen.

The yen has shown limited reaction to the ruling Liberal Democratic Party's leadership race, which formally kicks off on Friday ahead of a Sept 29 vote. The LDP's parliamentary dominance means the party's new leader will become prime minister.

The dollar also rose to a two-week high against the offshore yuan and was last up 0.3 per cent at 6.4711. The yuan is being pressured by growing worries about China's real estate sector as investors fear property giant China Evergrande could default on its coupon payment this week.

The British pound fell 0.4 per cent to US$1.3738 as UK retail sales undershot expectations. However, with investors bringing forward forecasts for a Bank of England interest rate hike to mid-2022, sterling remains supported. REUTERS