The dollar had its second weekly gain against the yen and euro as stronger-than-expected US economic reports stoked optimism the recession will end in coming months.
"You're getting the beginning of a bounce back in the US economy, which will bode well for the dollar," said Dustin Reid, a currency strategist at UBS Warburg LLC in Stamford, Connecticut.
The US currency rose as high as ?133.03 from ?132.54 yesterday, and later bought ?132.55. The dollar is trading within one yen of its highest level since October 1998, and rose 0.3 percent this week. Against a trade-weighted index of the currencies of Japan, the UK, the dozen euro nations, Switzerland, Sweden and Canada, the dollar climbed to ?108.35 yesterday, its strongest since Nov. 10, 1986.
The University of Michigan's January consumer confidence index showed a fourth monthly rise on Friday, boosting prospects for spending and growth. The index rose to 94.2 from 88.8 in December, compared with forecasts for 90. Reports earlier this week showed jobless claims dropped and manufacturing rose, buoying the dollar.
Currency traders have been looking for clues to gauge the timing of a rebound in growth since the world's largest economy slipped into recession last March and contracted at a 1.3 percent annual pace in the third quarter. Japan and Germany, the two next-biggest economies, are also in recession.
"Markets are sensing that the period of slower growth in the US is coming to an end," said Michael Turner, who helps oversee ?9 billion (US$12.9 billion) at Edinburgh Fund Managers in Edinburgh.
While it fell Friday to US$0.8841 per euro from US$0.8813, the dollar was still up 0.9 percent on the week.
The dollar earlier strengthened to near a three-week high against the euro at US$0.8795, and then pared gains after a break past the US$0.8815 level triggered rounds of orders to buy the dozen-nation currency, traders said.
Federal Reserve Bank of Richmond President Alfred Broaddus said yesterday that higher consumer confidence should boost household spending, helping to increase business investment and support economic recovery this year.
The number of people filing new claims for unemployment benefits dropped last week to the lowest level in more than five months in the US, while an index of Philadelphia-area manufacturing yesterday showed business grew in January for the first time in 14 months, reports yesterday showed.
Gains in the dollar were limited before a meeting today where representatives of US manufacturers will press the government to curb the currency's rise when they talk today with Undersecretary of Treasury for International Affairs John Taylor, traders said.
The National Association of Manufacturers and other US industry groups will likely highlight concerns that the dollar ascent to a 15-year high is crimping export sales and hurting growth.
Scot Montrey, a spokesman for NAM, said the dollar "is 30 percent overvalued against the yen and euro, and is killing manufacturing."
Taylor and Treasury Secretary Paul O'Neill will travel to Tokyo tomorrow to meet Prime Minister Junichiro Koizumi and other government ministers.
"The direction of dollar-yen in coming days depends on whether there's any new outcome from the meetings this weekend, and if O'Neill comes out with some statement in favor of US manufacturers," said John McCarthy, a manager of foreign exchange at ING Baring US Capital Markets.
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