The Shadow
NEW YORK (AP) – The dollar got a boost Wednesday from strong data on the U.S. housing and manufacturing sector, ahead of a release from the Federal Reserve that may help traders peg how the central bank feels about how soon to tighten credit conditions.
More clarity on the Fed’s plans could boost the dollar. Investors often transfer funds to where they can earn higher yields.
The 16-nation euro dropped below $1.37 in morning trading in New York. It had risen to almost $1.38 in overnight trading as fears over a Greek debt default that could threaten the stability of Europe’s monetary union ease somewhat.
In morning trading in New York, the euro fell to $1.3689 from $1.3757 late Tuesday in New York. The British pound slipped to $1.5726 from $1.5779 and the dollar rose to 91 Japanese yen from 90.13 yen.
The U.S. government said that housing construction and industrial production increased in January. Both posted a stronger showing than Wall Street economists had expected.
The Commerce Department said housing construction rose 2.8 percent last month, to a seasonally adjusted annual rate of 591,000 units – a good signal for the housing market.
Meanwhile, the Federal Reserve said production from manufacturing, mining and utilities rose 0.9 percent in January, the seventh straight monthly gain.
While the dollar tends to dip on better-than-expected economic data, the recent turmoil in Europe and an impending release of minutes from the Fed’s meeting last month are shaking up trading, analysts said.
They’ll be looking to see if there was a big discussion surrounding the Fed’s language that signals interest rates on overnight loans will stay near zero for a long time, said Matthew Strauss, senior currency strategist at RBC Capital in Toronto.
The Federal Reserve right now has “the greatest capacity” of several major central banks – the Bank of England, European Central Bank and Bank of Japan – to end emergency liquidity measures and normalize monetary policy, said Jessica Hoversen of MF Global in Chicago.
