Dollar hits three-week high, boosted by recent upbeat data, Fed taper view

© Reuters. FILE PHOTO: U.S. One dollar banknotes are seen in front of displayed stock graph in this illustration taken, February 8, 2021. REUTERS/Dado Ruvic/Illustration

By Gertrude Chavez-Dreyfuss and Tommy Wilkes

NEW YORK/LONDON (Reuters) -The dollar climbed to three-week peaks on Friday, still benefiting from better-than-expected U.S. retail sales data released on Thursday that backed expectations for a reduction of asset purchases by the Federal Reserve before the end of the year.

The dollar index, a gauge of the greenback's value against six major currencies, rose to 93.094, its highest since late August. It was last up 0.2% at 93.062.

The Fed holds a two-day monetary policy meeting next week and is expected to open discussions on reducing its monthly bond purchases, while tying any actual change to U.S. job growth in September and beyond.

"With tapering, there is definitely some upside in front-end and intermediate yields and should be dollar-positive upon the initial announcement," said Simon Harvey, senior FX market analyst at Monex Europe in London.

Speculation about a Fed taper this year gathered pace after U.S. retail sales unexpectedly increased in August, data showed on Thursday, rising 0.7% from the previous month despite expectations of a 0.8% fall. A business sentiment survey also showed a big improvement.

In mid-morning New York trading, the euro slid 0.2% to $1.1743, after hitting a three-week low of $1.1741 earlier in the session.

The University of Michigan consumer sentiment for September inched higher to 71 versus the final August reading of 70.3, but overall analysts said the rise was nowhere near the improvements seen in the Empire States and Philadelphia Fed manufacturing surveys.

The dollar held gains after the Michigan sentiment report.

Currency markets were generally quiet on Friday with traders reluctant to take on new positions ahead of a clutch of important central bank meetings next week including the Fed, the Bank of Japan and the Bank of England.

The dollar was up 0.2% against the Swiss franc at 0.9299 francs, after earlier hitting a five-month high.

The dollar rose 0.3% to 110.025 yen.

The yen has shown a limited reaction to the ruling Liberal Democratic Party's leadership race, which formally kicks off on Friday ahead of a Sept. 29 vote. The LDP's parliamentary dominance means the party's new leader will become prime minister.

The dollar also rose to a two-week high against the offshore yuan and was last up 0.1% at 6.4642. The Chinese currency is being pressured by growing worries about China's real estate sector as investors fear property giant China Evergrande could default on its coupon payment next week.

The Evergrande saga follows a series of regulatory clampdowns in China that has knocked investor confidence in the local stock market, as well as signs growth there is slowing.

The British pound fell 0.2% to $1.3758 as UK retail sales undershot expectations. However, with investors bringing forward forecasts for a Bank of England interest rate hike to mid-2022, sterling remains supported and is near one-month highs.

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Currency bid prices at 10:29AM (1429 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 93.0930 92.8730 +0.25% 3.459% +93.1090 +92.7600

Euro/Dollar $1.1742 $1.1768 -0.21% -3.89% +$1.1789 +$1.1742

Dollar/Yen 110.0150 109.7500 +0.24% +6.48% +110.0750 +109.6700

Euro/Yen 129.16 129.13 +0.02% +1.76% +129.6600 +129.0300

Dollar/Swiss 0.9303 0.9279 +0.27% +5.16% +0.9304 +0.9261

Sterling/Dollar $1.3756 $1.3792 -0.26% +0.69% +$1.3812 +$1.3755

Dollar/Canadian 1.2725 1.2685 +0.32% -0.06% +1.2726 +1.2638

Aussie/Dollar $0.7279 $0.7295 -0.22% -5.38% +$0.7321 +$0.7278

Euro/Swiss 1.0924 1.0915 +0.08% +1.08% +1.0935 +1.0906

Euro/Sterling 0.8534 0.8528 +0.07% -4.51% +0.8553 +0.8523

NZ $0.7037 $0.7076 -0.52% -1.98% +$0.7086 +$0.7036

Dollar/Dollar

Dollar/Norway 8.6560 8.6385 +0.20% +0.80% +8.6585 +8.5925

Euro/Norway 10.1640 10.1410 +0.23% -2.89% +10.1699 +10.1136

Dollar/Sweden 8.6657 8.6210 +0.31% +5.73% +8.6679 +8.6038

Euro/Sweden 10.1751 10.1435 +0.31% +0.98% +10.1781 +10.1370