The dollar rose on Thursday as better-than-expected housing and employment data suggested the US economy was improving, though hopes Europe was getting a handle on its debt crisis limited euro selling. Worries that China will try to choke off excessive growth with higher interest rates also boosted the greenback by sparking a sharp decline in the Australian and New Zealand dollars.
Australia exports natural resources to China, which makes its currency sensitive to China's economic outlook. The US dollar has struggled against major currencies in recent weeks and some say that decline coupled with signs of stronger US growth may spark a near-term rally.
A sharp rise in existing US home sales and a decline in first-time jobless applications was a hopeful sign as high unemployment and a depressed housing market are the biggest obstacles to a robust recovery. "We are finally seeing some growth and we have to at least think about when the Federal Reserve will (tighten) policy, even though it won't happen soon," said Jens Nordvig, global head of G10 FX strategy at Nomura.
Signs of stronger growth also pushed bond yields higher on Thursday, helping the dollar rise 1.2 percent to 83.03 yen and 1.3 percent to 0.9677 Swiss francs. The euro fell as low as $1.3396, though it recovered to $1.3466, unchanged on the day, and was within striking distance of Wednesday's two-month high of $1.3539.
The Aussie fell 1.3 percent to $0.9870 while the New Zealand currency shed 1.5 percent to $0.7579. Among major currencies, the euro did best in holding its ground against the greenback on Thursday. Sentiment has lately favoured the single currency, with persistent demand from sovereign accounts affording eurozone officials time to make progress on finding a sustainable solution to a debt crisis.
Eurozone officials were said to be considering letting the European Financial Stability Facility, the bloc's bailout fund, purchase or help finance the purchase of government debt from troubled eurozone nations. That has helped ease selling pressure on debt from Portugal and Spain. Technical analysts said the euro's ability to rebound from a brief dip below its $1.3435 100-day moving average was a bullish sign.