London - The dollar headed for its biggest weekly advance in a month against the yen as gains in new-home construction and worker productivity added to signs the world’s biggest economy is improving.
The US currency was poised for a weekly gain versus 12 of its 16 major counterparts as growth data fuelled speculation the Federal Reserve will start to reduce stimulus.
The Bloomberg Dollar Index pared gains today as bond prices traded at almost two-year highs and stocks fluctuated.
The New Zealand dollar rose even after an earthquake rattled the nation’s capital.
India’s rupee slid to a record amid concern the nation’s current-account deficit will keep widening.
The housing starts are “a decent rebound from June’s decline,” said Brian Kim, a currency strategist at RBS Securities Inc. in Stamford, Connecticut.
“Even though the Fed has said tapering is not tightening, it just feels like yesterday’s data was a little better, and CPI earlier in the week was a little higher, so people are saying ’OK, there’s tapering.’”
The dollar rose 0.1 percent to 97.49 yen at 10:20 a.m. in New York, having risen 1.2 percent this week, the most since the period ended July 19.
The US currency was little changed at $1.3353 per euro after appreciating to $1.3206 yesterday, the strongest level since August 2.
The yen fell 0.2 percent to 130.19 per euro.
The Bloomberg US Dollar Index added 0.1 percent to 1,020.80 after gaining as much as 0.2 percent.
It is up 0.4 percent this week.
Kiwi ‘Outperformance’
New Zealand currency’s briefly pared gains after a magnitude 6.6 earthquake and at least two powerful aftershocks struck the country’s central area, shaking the capital Wellington.
Police said there were no immediate reports of injuries.
The kiwi rose 0.4 percent to 81.03 US cents after advancing as much as 0.6, the strongest level since June 14, and falling 0.2 percent.
The rupee fell for a second day even after the Reserve Bank of India boosted efforts this week to stem its slide by cutting the amount local companies can invest overseas without seeking approval to 100 percent of their net worth, from 400 percent.
The rupee declined 0.3 percent to 61.65 per dollar after weakening to a record 62.005. India’s currency has slumped 11 percent this year.
Bonds, Stocks
Treasury 10-year yields have jumped 21 basis points this week and reached 2.82 percent yesterday, the highest level since August 2011. The Standard & Poor’s 500 Index of stocks is down 1 percent this week.
“The lower movement in the dollar today is just a short- term adjustment to the data -- with bond yields higher and equities lower, it means that people are selling these dollar- denominated assets,” said Eric Viloria, senior currency strategist for Gain Capital Group LLC in New York.
“In the longer term, tapering from the Fed and the diverging direction of monetary policy across the major economies is something that could be a positive for the dollar.”
Housing starts climbed 5.9 percent to an 896,000 annualized rate, from a revised 846,000 pace in June that was higher than previously reported, according figures from the Commerce Department.
That compared with a median estimate of 82 economists surveyed by Bloomberg for a 900,000 rate.
Fed Buying
The measure of employee output per hour increased at a 0.9 percent annualized rate, after a 1.7 percent decline in the prior three months, a Labor Department report showed today in Washington.
The median forecast in a Bloomberg survey of economists called for a 0.6 percent advance.
Separate reports this week showed that applications for unemployment insurance declined to the fewest since October 2007, and the cost of living in the US rose in July for a third month.
Fed Chairman Ben S. Bernanke will reduce the central bank’s $85 billion of monthly bond purchases next month, according to 65 percent of economists surveyed by Bloomberg.
The Federal Open Market Committee’s first step may be small, with monthly purchases tapered by $10 billion to a $75 billion pace, according to the survey conducted August 9-13.
“US data have been very encouraging -- it would take a very weak payrolls number in September to make the Fed hesitant,” said Niels Christensen, chief currency strategist at Nordea Bank AB in Copenhagen.
“We have seen yield spreads beginning to move in favor of the dollar again and I think that will intensify.”
The dollar has appreciated 3.8 percent this year, the best performer behind the euro among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
The euro gained 5.3 percent, while the yen tumbled 8.8 percent. - Bloomberg News