The dollar rose to match a two-year high versus the euro amid speculation the Federal Reserve will increase interest rates as early as April while other major central banks maintain monetary easing.

A gauge of the U.S. currency was about 0.2 percent from the highest level in more than five years before reports tomorrow that analysts said will show the nation’s economic growth quickened and orders for durable goods rose. Indonesia’s rupiah strengthened for a fifth day, the longest winning streak in 10 months. New Zealand’s dollar weakened against all except one of its major peers after a gauge of consumer confidence fell.

“A Fed interest rate hike by mid-2015 is in sight, while easing in Japan and Europe is expected to be prolonged,” said Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., which provides margin-trading services. “The dollar will be solid, supported by buying on any dips.”

The dollar weakened 0.1 percent to $1.2243 per euro as of 1:44 p.m. in Tokyo after appreciating to $1.2220, matching the strongest level since August 2012. The U.S. currency was little changed at 119.53 yen after reaching 119.66, the highest since Dec. 10. The euro advanced 0.1 percent to 146.29 yen.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, fell 0.1 percent to 1,124.58 after ending last week at 1,125.58, the highest closing level since March 2009.

‘Broad Support’

“U.S. data over the next three weeks are likely to underline the outperformance of the U.S. economy and provide broad support to the dollar,” Barclays Plc currency strategists including Hamish Pepper in London, wrote in a research note dated yesterday. “The Fed will begin hiking rates around the middle of next year, providing broad support to the dollar in the context of U.S. economic outperformance.”

The U.S. economy expanded 4.3 percent last quarter, up from an earlier estimate of 3.9 percent, according to a Bloomberg News survey before tomorrow’s Commerce Department report. Durable goods orders grew 3 percent in November, after rising 0.3 percent the previous month, a separate survey showed.

The dollar has gained 12 percent this year, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen weakened 2.9 percent and the euro fell 1.7 percent.

The rupiah extended its winning streak on speculation some investors are buying the nation’s bonds to take advantage of recent declines.

‘Short Rupiah’

“The market is repositioning as being short rupiah is painful considering the rates, especially near the year-end,” said Irene Cheung, a foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. in Singapore, referring to a bet the currency will decline.

The rupiah advanced 0.3 percent to 12,448 per dollar, extending its gain during the past five days to 2 percent.

New Zealand’s currency fell for a second day as Westpac Banking Corp. said its index of consumer sentiment dropped to 114.8 in the fourth quarter, the lowest level since the three months ended March 2013.

The kiwi declined 0.1 percent to 77.50 U.S. cents after falling as much as 0.6 percent.

The Australian dollar advanced against all except one of its 16 major counterparts as a gain in Asian stocks spurred demand for higher-yielding assets.

The Aussie rose 0.3 percent to 81.58 U.S. cents after falling to 81.07 cents on Dec. 17, the weakest since June 2010.

 

Source: Bloomberg – Dollar Matches Two-Year High Against Euro as Rupiah Strengthens

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