LONDON: The dollar regained some lost ground against the euro yesterday as players took the longer-term view that the US unit could move higher still after its recent recovery.
On Tuesday, sentiment on the dollar was hit by news that US factory gate inflation had jumped to a 27-year high while housing starts tumbled to a 17-year low.
Dealers said the market had taken seriously recent comments by senior US Federal Reserve about the dangers of inflation and the need to hike interest rates to keep rising prices in check.
With growth in the euro zone slowing sharply, increasing the chances the European Central Bank will cut interest rates, the dollar has risen strongly against the euro and it hit six-month highs on Monday. In late London trade yesterday, the euro was at 1.4701 dollars, down from 1.4734 dollars earlier and 1.4783 dollars in New York late on Tuesday.
Against the Japanese currency, the dollar rose to 110.00 yen from 109.67.
The euro hit a record high 1.60 dollars in mid-July but on Tuesday the single currency sank to a six-month low of 1.4631 dollars. Last week the dollar also reached its highest level since January against the yen.
Dealers said the dollar’s gains came despite the US wholesale price and housing data Tuesday, reflecting the fact that players found little else attractive in the market.
On the London Bullion Market, the price of gold rose to $815.75 per ounce from $788.75 late on Tuesday.
Oil prices fell yesterday after a sharp spike the previous day as the market reacted to a much larger-than-expected increase in US crude reserves, traders said.
New York’s main contract, light sweet crude for September delivery, dropped $1.22 to $113.31 a barrel. London’s Brent North Sea crude for October shed 95 cents to $112.30.
The US government’s Department of Energy said yesterday that US crude oil stockpiles climbed 9.4 million barrels in the week ending August 15 — analysts had forecast a much smaller gain of 800,000 barrels.