Dollar Near One-Week High on Treasury Yield Increase, U.S. Recovery Signs

By Yoshiaki Nohara and Catarina Saraiva - Jan 21, 2011 7:26 AM GMT+0800

The dollar traded near a one-week high against the yen as gains in benchmark Treasury yields and signs the U.S. economy is improving boosted demand for assets in the world’s largest economy.

The greenback held onto yesterday’s advance against most of its 16 major counterparts before a report next week forecast to show U.S. consumer confidence rose. Australia’s dollar was near the lowest level in a week against the greenback as commodities dropped, damping demand for growth-sensitive currencies.

“U.S. economic reports have been improving,” said Misato Nakashima, a currency analyst at Himawari Securities, Inc. in Tokyo. “That makes it easier for the dollar to be bought.”

The dollar was at 82.98 yen as of 8:01 a.m. in Tokyo from 83.01 yen in New York yesterday, when it touched 83.13, the highest level since Jan. 13. The U.S. currency was little changed at $1.3467 per euro from $1.3473. The yen was at 111.75 per euro from 111.82, after dropping 1.2 percent yesterday.

The Conference Board’s confidence index of U.S. consumers climbed to 54.2 this month from 52.5 in December, according to the median estimate of economists in a Bloomberg News survey before the report due Jan. 25.

Dollar Index

Initial applications for jobless benefits in the U.S. fell 37,000 last week to 404,000, the Labor Department reported yesterday. Sales of U.S. existing homes increased 12 percent to a 5.28 million annual rate, the most since May, figures from the National Association of Realtors showed yesterday.

Ten-year Treasury yields gained 11 basis points to 3.45 percent yesterday. A basis point is 0.01 percentage point.

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, rose 0.3 percent to 78.85 yesterday.

Australia’s dollar traded at 98.67 U.S. cents from 98.71, after reaching 98.33 yesterday, the weakest since Jan. 12. The New Zealand dollar was at 75.47 U.S. cents from 75.70. It touched 75.33 U.S. cents yesterday, the lowest since Dec. 28.

Canada’s dollar was little changed at 99.75 U.S. cents after dropping below parity with its U.S. counterpart for the first time in two weeks yesterday when it touched C$1.0031 per dollar.

The Thomson Reuters/Jefferies CRB Index of raw materials dropped 0.5 percent yesterday.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.