Euro hits 15-month high against dollar after solid earnings, home sales spur taste for risk
The dollar fell against most major currencies Wednesday, hitting a 15-month low against the euro, after solid earnings from major U.S. companies and a healthier reading on the housing market fueled investors' appetite for currencies linked to higher benchmark interest rates.
Higher interest rates tend to support investor demand for a currency, since it can generate a bigger return on investments denominated in that currency. The Federal Reserve has kept its key rate near zero since December 2008, while most of the world's other central banks are raising interest rates.
The euro jumped to $1.4514 in afternoon trading Wednesday from $1.4340 late Tuesday. Earlier, the euro hit $1.4547, its highest point since January 2010.
The dollar had advanced against the euro earlier in the week as speculation mounted that Greece would need to restructure its debt, but that fear wasn't weighing on the euro Wednesday as investors turned to assets of countries where interest rates are higher.
Greece's finance minister also said that the country's debt was "absolutely sustainable."
Investors' distaste Wednesday for the low-yielding dollar came after good news from major corporations and the troubled housing sector. The Commerce Department said that home construction rose 7.2 percent in March from February. Building permits, an indicator of future construction, rose 11.2 percent after hitting a five-decade low in February.
Strong earnings from technology companies in the U.S., including those from Intel Corp. and Yahoo Inc., pushed U.S. stocks higher, with the Dow Jones Industrial Average rising 1.5 percent. Oil prices settled above $111 per barrel on the New York Mercantile Exchange, while gold settled at $1,498.90 an ounce, its seventh consecutive day of gains.
The dollar, which investors consider a safe-haven currency, tends to give ground to the euro and other currencies perceived as riskier when prices for stocks and commodities rise.
In other foreign exchange trading, the British pound rose to $1.6407 from $1.6317. The dollar was unchanged at 82.37 Japanese yen.
The dollar also fell to 0.8890 Swiss franc from 0.8993, earlier touching a record low of 0.8876 Swiss franc, and dropped to 95.46 Canadian cents from 95.69 Canadian cents. The Australian dollar shot up to as much as $1.0692, its highest point against the dollar since it began trading freely in 1983.
The dollar was also lower against the Scandinavian currencies and currencies of developing economies.