(Bloomberg) — A gauge of the dollar headed for its best week in two months after Federal Reserve Chair Janet Yellen reaffirmed she expected the central bank to raise rates this year for the first time in almost a decade.
The U.S currency, the best performer against its nine- developed nation peers in the past month, got a further boost as investors shifted focus to the outlook for U.S. interest rates after concerns over Greece and China receded. The Bloomberg Dollar Spot Index gained on Friday after a report showed annualized consumer prices rose for the first time in six months in June and another showed new-home construction climbed to the second-highest level since November 2007.
Canada’s dollar touched its lowest level since 2009 versus the greenback after the nation’s central bank cut borrowing costs this week.
“There is desire to play interest-rate differentials but not as aggressively,” said Stuart Bennett, London-based head of Group-of-10 currency strategy at Banco Santander SA. “There is a feeling in the market that if they push the dollar too high, then despite what the Fed might be implying, it will have an influence on policy decisions. We are moving back to the dollar is king.”
Bloomberg’s Dollar Spot Index, which tracks the U.S. currency against its 10 major peers, rose 0.1 percent to 1,206.76 as of 8:40 a.m. New York time, the highest since April 13. The gauge has climbed 1.5 percent this week, set for the biggest gain since May 22.
The U.S. currency was little changed at 124.12 yen, about 1.4 percent from the 13-year high of 125.86 reached on June 5.
The U.S. consumer-price index climbed 0.3 percent in June after rising 0.4 percent in May, a Labor Department report showed Friday in Washington. That matched the median forecast of 81 economists surveyed by Bloomberg. Costs over the past 12 months increased for the first time this year.
U.S. housing starts rose 9.8 percent to a 1.17 million annualized rate from a revised 1.07 million in May that was stronger than previously estimated, figures from the Commerce Department showed Friday in Washington.