The dollar rallied against the yen for a fifth week and against the euro for a third, as investors anticipated that the US will recover from an economic slowdown before Japan or Europe.
The US currency has regained all the ground it lost in the week after the Sept. 11 terrorist assault. The dollar advanced even as anthrax-laced letters spurred concern terrorists will make increased use of biological weapons.
"People are trading on the expectation the US is going to be the first to get out of the slump," said Bernard Tsui, a corporate currency adviser at Union Bank of California in Los Angeles. After the attacks, "the dollar has survived the test and has picked up strength," helped by gains in stocks, he said.
This week the dollar gained 1.3 percent to ?122.76 and 0.7 percent against the euro, to US$0.8929 per euro. The US currency has risen 4.3 percent against the euro and 6 percent against the yen from lows reached after last month's attack.
US stock indexes also rose, fueling demand for the dollar.
The Dow Jones Industrial Average gained 0.9 percent, leaving it up 3.7 percent for the week. The NASDAQ Composite Index rose 5.8 percent this week.
Reports on home sales and consumer confidence left the dollar little changed against the yen and euro today. The University of Michigan's index of consumer sentiment rose to 82.7 this month from 81.8 in September. New US home sales fell 1.4 percent last month to an annual pace of 864,000 units, the lowest level in a year, the government said.
"It seems the market is focusing on the future and looking forward to things getting better, and not looking too much at current numbers" reflecting weakness, said Grant Wilson, a currency trader at Mellon Financial Corp in Pittsburgh.
Government figures next week are expected to show the US economy shrank 1 percent in the third quarter, according to the median forecast of 41 economists polled by Bloomberg News.
Economies in Europe and Japan are also sputtering.
"Prospects for growth are better here in the US by a long shot, given all that's been done fiscally and monetarily" to bolster the US economy, said Susan Stearns, a director of foreign exchange at Bank of Montreal.
"I don't think the market is so sanguine about the growth prospects in Europe, so the euro seems to be getting hammered."
A government plan to spur growth moved closer to enactment Wednesday, when the House of Representatives passed a US$100 billion tax cut to encourage business investment. The Federal Reserve has trimmed interest rates twice since the attacks, bringing banks' borrowing costs to an almost 40-year low 2.5 percent.
The European Central Bank's decision yesterday to leave its key interest rate at 3.75 percent deepened concern recession is imminent in the 12-nation region, analysts said.
The economies sharing the euro expanded only 0.1 percent in the second quarter, down from 0.8 percent a year earlier. Japan's economy contracted 0.8 percent during the April-to-June period.
"The bottom line is, things are deteriorating everywhere, and it appears those other economies have similar risks while officials there are not taking such extensive policy measures," said Robert Lynch, a currency strategist at BNP Paribas.
"The ECB, in particular, has not eased monetary policy as aggressively as other central banks, especially the Fed," and that's hurt the euro, he said.
European central bankers lowered borrowing costs just three times this year, compared to the Fed's nine cuts. The bank said the region's money supply growth last month was the fastest in the history of the euro. That may make an interest-rate cut at the bank's next meeting, on Nov. 8, less likely, analysts said. The dollar was little changed compared with ?122.87 and US$0.8925 per euro on Thurday.
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