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Dollar Index Reaches 2-Week High as Fed View Boosts U.S. Yields

June 24, 2013

June 24 (Bloomberg) -- The Dollar Index rose to a two-week high as the yield differential between U.S. and Japanese government securities increased to the widest in almost two years, increasing the appeal of dollar-denominated assets.

The U.S. currency rose against all but one of its 16 major counterparts before U.S. reports tomorrow that economists said will show durable-goods orders gained and house prices increased as the Federal Reserve may reduce monetary stimulus. A gauge of currency volatility climbed to the highest since June 2012. Chinese stocks fell the most in four years, damping investor interest in riskier currencies. The Swedish krona slid to a seven-month low versus the dollar.

"Long-term yields in the U.S. have continued to jump higher over the last week," Charles St-Arnaud, a foreign- exchange strategist at Nomura Holdings Inc. in New York, said in a telephone interview. "That’s driving some inflows and strength into the U.S. dollar. There’s been a reassessment of the whole liquidity story and what will be the impact on rates across the board."

The Dollar Index, which Intercontinental Exchange Inc. uses to monitor the U.S. currency against those of six trading partners, rose 0.3 percent to 82.531 at 8:57 a.m. in New York after climbing to the highest level since June 5.

 

Currency Levels

 

The dollar advanced 0.2 percent to $1.3101 per euro after appreciating to the strongest level since June 6. The U.S. currency weakened 0.4 percent to at 97.50 yen. The yen added 0.5 percent to 127.77 per euro.

JPMorgan Chase & Co.’s Group of Seven Volatility Index, based on currency option premiums, rose to as high as 11.83 percent today, the most since June 1, 2012. The gauge has averaged 8.76 percent in the past year.

Sweden’s krona declined versus all 16 of its major peers as the CSI 300 Index of Chinese stocks fell the most in four years, signaling a bear market. The currency dropped 1.3 percent to 6.7550 per dollar after depreciating to the least since Nov. 21. It has tumbled 4.4 percent in the past week.

The Norwegian krone fell against the majority of its most- traded counterparts, slipping as much as 1.6 percent to 6.1539, the lowest since July 17.

 

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