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Dollar Index Trades Near 6-Month High

The Dollar Index traded at almost its highest level in six months as service industries in the U.S. expanded in February at the fastest pace in a year, adding to signs of economic acceleration.

The U.S. currency was supported after the Institute for Supply Management’s non-manufacturing index exceeded forecasts, fueling speculation the Federal Reserve may have scope to reduce monetary stimulus earlier than projected. The yen erased losses before the Bank of Japan (8301) convenes for a two-day meeting starting tomorrow. Australia’s currency climbed versus the dollar as the central bank kept interest rates on hold.

“ISM services were better than expected and markets are higher,” Eric Viloria, a senior currency strategist at Gain Capital Group LLC in New York, said in a telephone interview. “The market is responding positively to the fundamentals. If data improve, that reduces the likelihood of prolonged quantitative easing, which would cause the dollar to strengthen.”

Bloomberg [1]

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