Dollar Rises to Two-Month High on Signs Economy Strengthening

By Ben Levisohn

Dec. 29 (Bloomberg) -- The dollar advanced to a two-month high against the yen as reports showed increases in U.S. consumer confidence and home prices, encouraging speculation the Federal Reserve will start to withdraw stimulus measures.

The greenback strengthened as the yield advantage of holding U.S. Treasury notes instead of similar-maturity Japanese debt was almost the highest in two years.

“The data was certainly more good than bad and provided no threat to the dollar,” said Kathy Lien, director of currency research at the online foreign-exchange trader GFT Forex in New York. “It’s the second month in a row we’ve seen an improvement in consumer confidence, and that’s having a positive effect.”
The dollar increased 0.4 percent to 92.01 yen at 11:36 a.m. in New York, from 91.63 yesterday. It touched 92.03, the highest level since Oct. 27. The dollar appreciated 0.3 percent to $1.4339 per euro, from $1.4378. The euro climbed 0.1 percent to 132.95 yen, from 131.76.

An index of home prices in 20 U.S. cities rose in October for a fifth consecutive month, putting the housing market and economy farther down the path to recovery.

The S&P/Case-Shiller home-price index increased 0.4 percent from the prior month on a seasonally adjusted basis, after a 0.2 percent gain in September, the group said today in New York. The gauge was down 7.3 percent from October 2008, the smallest year- over-year decline since October 2007.

The Conference Board’s confidence index increased this month to 52.9, in line with the median forecast of economists surveyed by Bloomberg, from 50.6 in November, the New York-based research group said today.
To contact the reporter on this story: Ben Levisohn in New York at blevisohn@bloomberg.net