London / Tokyo: The dollar rose towards a nine-month high against the euro as signs the US economy is gaining momentum added to speculation the Federal Reserve will be one of the first major central banks to remove stimulus measures.
The greenback advanced versus 14 of 16 major currencies, helped as gold prices fell after the International Monetary Fund said it would begin selling bullion. The dollar extended gains against the euro amid speculation European lenders may need more short-term funding from central banks amid Greece’s fiscal crisis.
“The US is in a comfortable and leading position when it comes to growth and interest-rate differentials, and that’s supportive for the dollar,” said Audrey Childe-Freeman, a senior currency strategist at Brown Brothers Harriman Ltd. in London. “It’s likely that an exit strategy will be contemplated in the US well before the euro zone.”
The dollar strengthened to $1.3580 per euro at 7:37am in New York on Thursday from $1.3607 on Wednesday. It reached $1.3532 on 12 February, the strongest since 19 May. The yen rose to 123.36 per euro from 124.17, and to 90.85 versus the dollar from 91.25.
The euro has slumped 5.2% against the dollar this year and 7.4% against the yen amid concern sovereign debt problems will hamper the 16-nation currency area’s recovery. The European Central Bank’s marginal lending facility extended more than €15 billion ($20.4 billion) over 11, 12, 15 and 16 February, according to central bank data.
The dollar was also pushed higher after minutes of the Fed’s 26-27 January meeting released Wednesday showed some officials wanted to start selling assets in the near future as a way to shrink the bank’s balance sheet. They unanimously agreed that Fed assets and banks’ excess cash will need to shrink substantially over time and the central bank will need to return to holding just treasuries.