Dollar surges to five-month peak

The dollar reached a five-month high against the yen and a two-month high against the mark yesterday as the rally gained momentum. Its recovery was helped by encouraging inflation and unemployment figures in the US.

By the London close, the dollar was up by over a yen at 92.82 and by nearly 2 pfennigs at DM1.4221.The pound weakened by a cent against the dollar, closing at $1.5885, but strengthened by a pfennig against the mark, ending the day at DM2.2590, leaving the trade-weighted index against a basket of currencies unchanged at 84.5.

"The breadth of buying over the past two days has exceeded anything seen this year," said Avinash Persaud, head of currency research at JP Morgan. "Confidence about the prospects for the dollar is now much greater, with more than just a few bold investors dipping their feet in the market."

A feature of the dollar-buying was that it embraced mainstream institutional investors and corporations as well as hedge funds chancing their arm. Funds controlled by the currency speculator, George Soros, were also reported as making heavy purchases of dollars.

"Finally, people are starting to believe in the dollar rally," said Lee Ferridge, currency strategist at NatWest Markets. He predicted that, by the end of next week, the dollar could reach Y94, a key resistance point according to technical analysis of the market.

Although the dollar rallied against the mark, it continued to be driven by the recovery against the yen. It is now up by 16 per cent on the low point it reached in April. According to Mr Persaud, markets have taken on board a new stance on the part of Japanese policy-makers, who are now "far more unified, coherent and resolute in their determination to push the yen lower".

However, so far Japanese portfolio investors have apparently been staying mainly on the sidelines. Without their involvement, further big gains - for example taking the dollar back to 100 - are seen as unlikely.

The dollar was also helped by better-than-expected unemployment figures. Initial claims rose by 14,000 in the week to 5 August, compared with market predictions of 25,000. The US Labor Department said that the four-week moving average for claims of 361,000 in the past week was the lowest for three months.

This sign of greater strength in the labour market was seen as likely to fend off further easing of monetary policy by the US Federal Reserve when it next meets on 22 August. With interest rates less likely to fall, this was a further attraction to buy the dollar at a time when it was already rallying.

There was also encouragement from "very tame inflation figures" in the US, which "gave fresh impetus" to dollar-buying, according to Neil MacKinnon, currency strategist at Citibank. Producer prices in July were unchanged on their level in June.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
musicOfficial chart could be moved to accommodate Friday international release day
Sport
Wes Brown is sent-off
football
News
i100
Sport
Italy celebrate scoring their second try
six nations
Sport
Glenn Murray celebrates scoring against West Ham
footballWest Ham 1 Crystal Palace 3
Arts and Entertainment
Drake continues to tease ahead of the release of his new album
music
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003
Barbara Woodward: Britain's first female ambassador to China intends to forge strong links with the growing economic superpower

Our woman in Beijing builds a new relationship

Britain's first female ambassador to China intends to forge strong links with growing economic power
Courage is rare. True humility is even rarer. But the only British soldier to be awarded the Victoria Cross in Afghanistan has both

Courage is rare. True humility is even rarer

Beware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Alexander McQueen: The catwalk was a stage for the designer's astonishing and troubling vision

Alexander McQueen's astonishing vision

Ahead of a major retrospective, Alexander Fury talks to the collaborators who helped create the late designer's notorious spectacle
New BBC series savours half a century of food in Britain, from Vesta curries to nouvelle cuisine

Dinner through the decades

A new BBC series challenged Brandon Robshaw and his family to eat their way from the 1950s to the 1990s
Philippa Perry interview: The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course

Philippa Perry interview

The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course
Bill Granger recipes: Our chef recreates the exoticism of the Indonesian stir-fry

Bill Granger's Indonesian stir-fry recipes

Our chef was inspired by the south-east Asian cuisine he encountered as a teenager
Chelsea vs Tottenham: Harry Kane was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope

Harry Kane interview

The striker was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope
The Last Word: For the good of the game: why on earth don’t we leave Fifa?

Michael Calvin's Last Word

For the good of the game: why on earth don’t we leave Fifa?
HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?