28 July 2004, 15:51  Dollar extends broad-based rally after data boost

The dollar notched six-week highs against the euro and yen on Wednesday, extending gains after upbeat consumer confidence data rekindled expectations of a strong and sustainable U.S. recovery. Data on Tuesday showed U.S. consumer confidence rose to a two-year high in July, backing the view expressed by Federal Reserve Chairman Alan Greenspan last week that a recent soft spot in the economy would be short-lived. The dollar was trading just short of session highs at 1130 GMT as investors waited to see if U.S. durable goods data and the Federal Reserve's "beige book" survey later in the day would also chime with Greenspan's upbeat assessment. "People who went short dollars were caught out both by Greenspan's testimony last week and yesterday's strong consumer confidence data," said Ian Gunner, head of foreign exchange research at Mellon. "If forthcoming data continues to support the dollar, this rally could have further to go." Having got a leg-up from the surprisingly strong confidence data, the dollar vaulted key technical levels in European trade to hit $1.2009 per euro and 111.56 yen , its highest since mid-June. It also rose to a two-month high against the Swiss franc and a one-month high against both sterling and the Australian dollar.
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Durable goods orders due at 1230 GMT are expected to have risen 1.9 percent in June, after lacklustre readings in the past few months. Currency investors are awaiting the release of the Federal Reserve's Beige Book survey of economic conditions due at 1800 GMT. "We had some excellent economic news from the U.S. yesterday in the form of the consumer confidence data," said Chris Gothard, currency analyst at Brown Brothers Harriman in London. "This was a heck of a way to start proving Greenspan's optimism and the dollar is still moving on the back of that." Analysts said a daily close for the euro below chart support at $1.2050 could encourage more dollar buying from technical and momentum-based funds. In Europe, economic news was mixed with French business morale hitting a three-year high but sentiment among German consumers remaining sluggish. Data out of Japan was less supportive for the yen, with Japanese retail sales falling for a fourth straight month in June, hurt by bad weather and poor sales of clothing. Retail sales in June were down 2.9 percent compared with a year earlier, weaker than most economists' forecasts. More Japanese data is due later in the week, including industrial output on Thursday and unemployment and consumer price figures on Friday.///

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